Annual Report 2018

ANNUAL REPORT 2018

1 2 ABOUT BINCKBANK

3 4 ANNUAL REPORT 2018 This document is a translation of the Dutch original and is provided as a courtesy only. In the event of any disparity, the Dutch version shall prevail. No rights may be derived from the translated document.

6 TABLE OF CONTENTS

BinckBank at a glance 8 Key figures 9

ABOUT BINCKBANK Chairman’s message 11 Who we are 13 What we do 15 Customer value and dialogue 16 Notable events 18 Information for the shareholder 19 Reserve and dividend policy 21

REPORT OF THE EXECUTIVE BOARD Developments in 2018 23 Notes to the consolidated result for 2018 27 Earnings model 29 BinckBank’s operational structure 32 Strenghts, weaknesses, opportunities, and threats (SWOT-analysis) 34 Prospects and objectives 38 Human resources 39 Corporate social responsilibility 42 Tax policy 46

CORPORATE GOVERNANCE Corporate governance 51 Decree implementing article 10 of the takeover directive 57

RISK MANAGEMENT Risk management 59

MANAGEMENT STATEMENT In control statement 71

REPORT OF THE SUPERVISORY BOARD Message from the chairman of the Supervisory Board 73 Duties of the Supervisory Board 74 Composition of the Supervisory Board 75 Meetings of the Supervisory Board and subcommittees 76 Summary of BinckBank’s remuneration report for the 2018 financial year 81 Financial statement and dividend 86

PERSONAL DETAILS OF THE BOARD MEMBERS 87

FINANCIAL STATEMENT 2018 91

7 ABOUT BINCKBANK

BINCKBANK AT A GLANCE

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illion illion illion 0.230.230.23 149.0149.0149.0 0.53 0.26 0.53 0.26 0.53 0.26 147.7147.7147.7 142.8142.8142.8 0,390,390,39 illion illion 149.0149.0149.0 illion 0.23 0.23 0.23 147.7147.7147.7 142.8142.8142.8 0.530.53 0.260.26 0.130.130.13

illion 0.23 illion 0.530.530.53 0.23 0.130.130.13 0.260.260.26 0.070.070.07 0.13 0.13 0.13 illion illion illion 0.13 0.13 0.530.530.53 0.230.230.23 0.260.130.260.26 0,00,00,0 0.130.13

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RATIOS otincoeotincoeotincoe atio atio atio aitalaitalaital atio atio atio eeageeeageeeage atio atio atio otincoe atio aitalotincoe atio atio eeageotincoeaital atio atioatio aitaleeage atio atio eeage atio otincoeotincoe atio atio aitalaital atio atio eeageeeage atio atio 94%94%94%otincoeotincoe95%95%95% atio atio aitalaital atio atio eeageeeageeeage atioatio atio 888 888 94% 95% 94%otincoeotincoe95% atio atio 81%81%81% 94% aitalaital95% atio atio eeageeeageeeage atioatio atio 8 8 8 8 8 8 94%94% 95%95% 81% 8 81% 81% 6.7%6.7%6.7% 6.6%6.6%6.6% 8 95%95%95% 31.9%31.9%31.9% 30.8%30.8%30.8% 31.8%31.8%31.8% 88 6.3%6.3%6.3% 94%94%94% 81%81% 6.7% 6.7% 6.7% 88831.9%94%94%94% 30.8%95%95%95% 31.8% 31.9% 6.6% 30.8% 6.3% 31.8% 888 31.9% 30.8%6.6% 31.8%6.3% 6.6% 6.3% 888 81%81%81% 888 6.7%6.7% 6.6%6.6% 81%81%81% 31.9%31.9% 30.8%30.8% 31.8%31.8% 6.3%6.3% 31.9%31.9%31.9% 6.7%6.7%6.7% 6.6%6.6%6.6% 30.8%30.8%30.8% 31.8%31.8%31.8% 6.3%6.3%6.3% 31.9%31.9%31.9% 31.8%31.8%31.8% 6.7%6.7%6.7% 6.6%6.6%6.6% 6.3%6.3%6.3% 30.8%30.8%30.8% 888 888 888 8 8 8 888 88 8 88 88 88 888 888 888 888 888 888

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billion billion billion billion billion billion online bank illion illion illion 0.90.90.9 billion billion billion 888 billion billion billion 888 8 8 8 88 8 88 88 888 888 888 888 for investors

CUSTOMERS AND CUSTOMER SATISFACTION ItalieItalieItalie Italie Italie Italie bebebe of ofaccont of accont accont toetoetoe atifaction atifaction atifaction bebebe of ofaccont of accont accont e e e conty conty conty ankikankikankik by by contyby conty conty be of accont toebe atifaction of accont bebe oftoe accont of accont atifaction e conty betoein of intoan inaccont toan atifaction toan by econty conty ItalieItaliebe of accont e contyby conty by conty ankik ankik ankik bebe of of accont accont toetoein toan atifaction atifaction bebe of of accont inaccont toan e e conty conty BelgieBelgieItalieItalieItalieBelgie in toan by by conty conty Belgie ankikBelgieankik 642642642 Belgie bebe of of accont accont toetoe atifaction atifaction bebe of of accontin accontin toan toan e e conty conty eelanItalieeelanItalieeelanItalie 6346346344 4 4 byby by contyconty4 conty4 4 8 88 ankikankikankik 19 1919 21 2121 36 3636 579579579 615615615bebe 633of of633 accont633 accont639639639 toetoe atifaction atifaction bebe 634of of accontinin inaccont toantoan toan e642 e conty4 conty BelgieBelgie 63436 3636 byby by 642 contyconty conty4 5 5 5 634 642 4 8 8 eelan8 19 4 21 ankikankikankikeelan36 361936 4 40 402140 23 2323 eelan 19 4 21 633 639 633 639 7.37.37.3 7.56337.57.5 7.46397.47.4 inin36in toantoan toan 36 579 5 BelgieBelgieBelgie 53953936539 64264254154154136 57937 37537 36 36 579 5 615 615 615 36 40 23 eelaneelan 36 634634 40 4 4 42 422342 aneaneane 36 40 23 88 37 BelgieBelgieBelgie 1919 4 4 2121 57947247247237 37 7.3 7.5 633633 7.4 639639 7.3 7.5 7.4 7.3 5397.5 541 7.442 634634634 3653936 642642642 4436454136 42 579 5 5 539 541 42 615615 otalotal otal otalotal otal8 8 8 etelanetelanetelan ane eelaneelaneelan 1919361936 44 4 2121402140 2323 ane ane 633633633 639639639 88 8 7.57.5 7.4 472 634634634 363636539 642642642 365413636541 579579579 3747237 ItaliItaliItali 472 615615615 otal 7.37.3 otal 8 7.4 otal otal 8 eelaneelaneelanotal 363636 445394otal212140 4082140 44 4 2323422342 55 5 88 8 etelan etelan Itali 191919 etelan579579579 373737 aneItaliane Itali toan toan toan 633633633 639639639 7.57.57.5 363636 365413654154136 472472 615615615 7.37.37.3 7.47.47.4 633633633 639639639 BelgiBelgiBelgi 363636 539539539 404040 232342422342 55 5 ankikankikankik otalotal otalotal 8 8 etelanetelan 374723747247237 aneaneane

toan toan toan 7.57.57.5 541541541 6337.37.37.3 639 7.47.47.4Belgi 633 639 Belgi ankik 633 539539539639 Belgi424242 ItaliankikItali ankik otalotalotal otalotalotal 88 8 anceanceance BelgianeBelgianeBelgiane etelanetelanetelan 472472472 ItaliItaliItali toan toan 633633 639639 BelgiBelgi ance otalotalotal otalotalotal 88 8 ance Belgi ance ankikBelgiankik Belgi etelanetelanetelan eelanItalieelanItalieelanItali toan toan toan ItalyItalyItaly 633633 639639 BelgiBelgiBelgi ankikankikankik anceance BelgiBelgi toan toan toan 888 888Italy 633 633 639639 BelgiBelgiBelgiItaly eelan Italy ankikankikankikeelan eelan anceanceance BelgiBelgiBelgi 8 8 8 88 8 ItalyItaly eelaneelan anceanceance BelgiBelgiBelgi 88 88 ItalyItalyItaly eelaneelaneelan 888 888 ItalyItalyItaly eelaneelaneelan 888 888 EMPLOYEES

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KEY FIGURES for the period ending 31 December, consolidated

(amounts in € 000’s) 2018 2017 2016 2015 2014

CUSTOMER FIGURES

Number of transactions* 9,870,170 7,705,024 7,726,110 9,293,591 8,617,490

Assets under administration 24,376,808 26,027,985 22,793,380 20,575,397 18,538,716

Assets under management 890,434 1,090,881 1,279,980 1,697,871 1,952,193

COMPANY PROFIT AND LOSS ACCOUNT

Net interest income 32,070 30,039 26,325 25,724 28,497

Net fee and commission income 102,975 105,858 109,076 131,461 125,951

Other income from operational activities 7,749 13,072 12,324 12,993 11,285

Total income from operating activities 142,794 148,969 147,725 170,178 165,733

Total adjusted operating expenses 115,368 141,586 138,149 130,378 141,385

Total operating expenses 27,426 7,383 9,576 39,800 24,348

Tax (400) 274 (2,134) (8,368) (5,555)

Results of associates and joint ventures 8,436 864 (2,821) (730) 12,674

Net result 35,462 8,521 4,621 30,702 31,467

Result attributable to non-controlling interests (282) 450 (87) (1,076) 87

Result attributable to shareholders BinckBank 35,180 8,971 4,534 29,626 57,476

Adjusted net earnings per share (in €) 0,53 0,13 0,07 0,42 0,45

Cost/income ratio 81% 95% 94% 77% 85%

Adjusted result**

Adjusted net result** 35,462 34,443 30,543 56,624 57,389

Adjusted net earnings per share (in €)** 0.53 0.52 0.45 0.79 0.82

CAPITAL ADEQUACY

Own funds 248,998 249,522 245,542 253,582 225,898

Capital ratio 31.8% 30.8% 31.9% 40.2% 37.1%

Leverage ratio 6.3% 6.6% 6.7% 7.1% 6.7%

* The number of transactions include transactions which do not have a direct commission income, such as the transactions in Binck turbos that have been offered free of charge since October 2017. ** Compared to the IFRS results are up to and including 31 December 2017, within the adjusted result the total operating expenses and taxes adjusted for IFRS amortisation and tax savings on the difference between fiscal and commercial amortisation of the intangible assets acquired with the acquisition of Alex and goodwill paid. From 2018 onwards, there is no difference compared to the IFRS results.

9 ABOUT BINCKBANK ABOUT BINCKBANK

CHAIRMAN’S MESSAGE

The first results of the strategic repositioning and commercial relaunch did not go unnoticed and resulted in an intended offer by Saxo Bank for the shares of BinckBank. The combination of the two companies can thus claim a leading role in the expected consolidation within the sector.

BinckBank had an eventful year. On the one hand we made good progress with the relaunch of BinckBank by focusing on the commercialisation of our new ‘Laten Beleggen’ (discretionary management) services and the further strengthening of our position in ‘Zelf Beleggen’ (self-investment) services. We invested in the brand and the strengthening of our positioning; in the future we will operate exclusively under the BinckBank name. A great deal of time and energy was also devoted to making the organisation more effective. A lot of attention was focused on cost control and the further rollout of the ‘agile’ working method. In the second half of 2018 we entered into discussions with Saxo Bank and on 17 December 2018 we and Saxo Bank jointly announced that we had reached conditional agreement on a recommended public offer of € 6.35 in cash per issued and outstanding ordinary share and priority share in BinckBank.

The Saxo Bank offer comes at a time when the sector is facing a range of challenges, including fierce competition, increased regulation and low interest rates, on the eve of an expected consolidation in the European market. Achieving economies of scale is an important factor in strengthening our future position. Joining forces with Saxo Bank offers the necessary perspectives for customers and employees to take on the challenges mentioned above. The two companies’ innovative products and services, the combination of BinckBank’s customer knowledge with the economies of scale of the Saxo Bank platforms and geographic complementarity will ultimately secure a strong position in the European market. Moreover, we have very similar businesses. Saxo Bank and BinckBank are both fintech pioneers with leading positions in online investing. Saxo Bank also endorses our mission, vision and strategy and will support a further rollout thereof.

Before conditional agreement was reached, the Board of Directors and the Supervisory Board thoroughly analysed the bid and the potential combination with Saxo Bank and compared it with a standalone position and other strategic alternatives. The long-term interests of BinckBank, its company and stakeholders were taken into account. After careful consideration of the stakeholder interests involved and with the assistance of our legal and financial advisers, we unanimously concluded that the offer is in the best interest of BinckBank, the lasting success of its company and customers, employees, shareholders and other stakeholders.

We believe it is important to share our considerations, insights and recommendations regarding the offer with you by publishing our position. The position determination will become available on BinckBank’s website (www.binck.com/investors).

11 ABOUT BINCKBANK

In order to improve our future and open up increased opportunities, BinckBank initiated a broadening strategy (Rethink Binck) in 2015 when I was appointed chairman of the Executive Board. We stated our desire to transform ourselves from a pure online broker to a broader wealth bank. Over the past few years we have introduced various new services such as the ‘Laten Beleggen’ (discretionary management) products ‘Binck Comfort’ and ‘Binck Forward’ and the ‘Binck Sparen’ savings product. As well as developing new products, we have made various adjustments to the earnings model, optimised the operational structure and changed the balance sheet structure to meet the challenges facing us and strengthen our competitive position. In the past years we have improved the focus of our business operations by disposing of activities no longer consistent with our core business. Although we have taken careful steps in our strategic transformation in recent years and remain optimistic about BinckBank’s future potential, we have also been realistic in our evaluation. Both the Executive Board and the Supervisory Board have concluded that in the light of external factors the strategic transformation will require more time than was initially thought.

I would like to thank our customers and shareholders for their confidence in BinckBank. We trust that our shareholders will also consider the offer by Saxo Bank to be attractive and that they will therefore tender their shares within the specified periods. Finally, I would like to thank all our employees for their commitment during the past year.

Amsterdam, 11 March 2019

BinckBank N.V. Vincent Germyns, chairman of the Executive Board

12 ABOUT BINCKBANK

WHO WE ARE

BinckBank profile

BinckBank N.V. (BinckBank) is an online bank for investors and savers, established in the Netherlands and listed on the Euronext Amsterdam exchange. Our services are deployed from our head office in the Netherlands and our local branches in Belgium, France, and Italy, and from our representation in Spain. BinckBank offers services in investment, asset management and savings, and targets its services to retail customers, businesses/legal entities, and independent asset managers.

NETHERLANDS be of tanaction 71 illion et ne ainitation 195 billion et ne anageent 837 illion toe atifaction 70 be of eloyee 441 BELGIUM be of tanaction 10 illion et ne ainitation 33 billion et ne anageent 53 illion toe atifaction 84 be of eloyee 40

FRANCE be of tanaction 10 illion et ne ainitation 09 billion toe atifaction 82 ITALY be of eloyee 38 be of tanaction 07 illion et ne ainitation 07 billion toe atifaction 85 be of eloyee 24

BINCKBANK IN A EUROPEAN CONTEXT

13 ABOUT BINCKBANK

Our environment

Our business activities are first and foremost about achieving added value for our customers. BinckBank is about confidence, convenience, simplicity, clarity, understanding, and accessibility at acceptable prices. By staying true to these principles, we are able to offer services accessible to all. BinckBank also understands its role in maintaining the public’s trust in the financial sector. Privacy and online security is one critical area in social responsibility that BinckBank must live up to; compliance with corporate governance is another. We regard concern for the social effects of the company’s operations as a core value.

Our mission

BinckBank supports and assists consumers who are actively engaged with their financial future with the innovative products and services that give them convenience, simplicity, clarity, understanding, and accessibility at acceptable prices. BinckBank activates, facilitates, and teaches customers how to independently build up and maintain their own asset base.

Our vision and ambition

BinckBank believes in customers’ financial self-reliance. People should be able to control their own financial affairs. We believe each and every customer should have optimum control of and insight into the development, risk, and return of his or her capital.

We aspire to serve a broader and growing group of private individuals within our European footprint, namely those customer groups that are looking for the best alternative to preserve or continue to accumulate assets for their financial future in a reliable, transparent, simple, and cost-effective manner, either independently or with our assistance. This ambition is focused on long-term value creation and is reflected in the ReThink Binck strategy launched in 2015. In order to carry out this strategy, BinckBank provides a diverse range of financial products and services within a customer environment that is as digitally driven as possible. In the total range of products and services, BinckBank will assume the role of navigator and assist customers in making the choices that fit them best.

Our strategy

BinckBank pursues a dual strategy. On the one hand, this strategy is directed to furthering our current core activities like brokerage services (trading) and operational excellence in the trading and investment platform. On the other hand, it is designed to, with the help of our partners, create new value propositions for customers in Investing, Trading, and Saving. This strategy will, in part, enable us to expand our services into automated asset management and allow us to help our customers to grow their assets. At the core of this strategy is the customer experience and customer satisfaction that BinckBank’s services deliver.

Our core value

Our core value forms the basis for realising our strategic priorities and is entwined to achieve the goals we have set for our organisation. Our people strive to live according to the core value: empower and guide. We are convinced that, by living our core values, we create a culture that is not only beneficial for our employees and organisation, but also for supporting our clients in achieving financial independence, creating a solid return for our shareholders and strengthen our position in society.

Our specialised staff is the core of BinckBank. As a customer-oriented and innovative company, we must be able to build on the quality of our employees and our people are essential for achieving BinckBank’s organisational objectives. That is why we create a culture in which continuous improvement, flexibility and risk awareness are the norm. We always follow our standards of conduct and our principles.

14 ABOUT BINCKBANK

WHAT WE DO

BinckBank supports your independence

Standing on your own two feet. Setting your own course, because you like to be in control. In short, making your own choices and being responsible for your own life goals. And at BinckBank, nothing impresses us more. We do our utmost to support you to the best of our abilities. In fact, we have been doing this since our inception in 2000 and continue to do so – with products such as ‘Zelf Beleggen’ (Personal Investment), ‘Fondsbeleggen’ (Fund Investment), ‘Laten Beleggen’ (Invest for Me), ‘Binck Sparen’ (Binck Savings), and ‘Binck Pensioenbeleggen’ (Binck Pension Investment). We are always looking for ways to see how we can serve you even better. Also invest in your most valuable asset – your own independence.

ZELF BELEGGEN (PERSONAL INVESTMENT) ‘Zelf Beleggen’ is investing at competitive rates with a smart app and user-friendly platform. Customers invest themselves, but support is close at hand. Successful investing starts with smart and user-friendly platforms. BinckBank’s award-winning website and app are secure. Invest on the main stock exchanges in eighteen countries. From shares, bonds, and investment funds to turbos and options. Tools and functionalities, like ‘Marktverkenner’ (Market Explorer) and our many other smart innovations, make life just that little bit easier. And if customers cannot find a solution, our Customer Service & Order Desk is ready to lend them a helping hand. In this way, customers are always in control of their investments.

FONDSBELEGGEN (FUND INVESTMENT) With ‘Fondsbeleggen’, BinckBank gives customers the opportunity to perform their own transactions in investment funds. And with ‘Binck Fundcoach’, customers can easily build up their own assets – with investment funds and exchange-traded funds (ETFs). These instruments are particularly suitable for this purpose. Think of the relative simplicity, a wide choice, and excellent diversification. And good news: customers can invest monthly without any transaction costs! Is investing complicated? Not with All-in-1 Portfolios, a mix of shares, bonds, and property funds. With global coverage and carefully management. And all at low cost. Within ‘Fondsbeleggen’, BinckBank allows customers to choose to invest in and contribute towards a better future with a wide choice of green investment funds and ETFs. We work closely with VBDO (Association of Investors for Sustainable Development). They keep track of which funds are sustainable.

LATEN BELEGGEN (INVEST FOR ME) ‘Laten Beleggen’ means outsourcing your portfolio management to BinckBank. We then navigate the customer, to the most appropriate service, based on your personal wishes, characteristics, investment goal, and expected risk and return. Under ‘Laten Beleggen’, we offer the following services: ‘Binck Forward’ for asset growth with the objectives specified by the customer; ‘Binck Comfort’ for both asset growth and preservation with more rigorous restrictions on investment risk; and ‘Binck Select’, with a focus on capital growth or preservation using an asymmetric investment model.

BINCK PENSIOENBELEGGEN (BINCK PENSION INVESTMENT) ‘Binck Pensioen’ is aimed at asset growth to supplement retirement benefits, taking specific tax regulations into consideration. Investments are made worldwide and optimally diversified in index funds. The fund mix depends on the period remaining until retirement date, personal circumstances, and the indicated risk appetite. BinckBank reduces the risk profile in the investments as pension date approaches.

15 ABOUT BINCKBANK

BINCK SPAREN (BINCK SAVINGS) ‘Binck Sparen’ is a simple online savings brokerage service for savings deposits with various financial institutions in trusted European countries. The choice between savings deposits in different European countries is intended to help savers earn more in today’s low interest-rate climate, while avoiding the risks of investment.

KNOWLEDGE & INSPIRATION To support customers in achieving their financial independence, BinckBank offers investor education facilities. The Binck Academy was launched to help investors achieve their financial ambitions and make sensible investment decisions. Because investing and asset accumulation can be very simple, but that does not mean that it is easy. This is done with webinars on wealth creation, trading and other financial subjects, tutorials on turbos, options or technical analysis, investment meetings, and the publication of articles and white papers on investing. We also regularly try to inspire customers with trading ideas, investment opportunities, trends, and the facts behind the news.

CUSTOMER VALUE AND DIALOGUE

In today’s digital world, fulfilling customers’ specific wishes and expectations is becoming increasingly important. BinckBank’s challenge is to discover how these customer-specific wishes and expectations develop and then respond with an appropriate mix of products and services. BinckBank is very active in dialogue with customers, using customer panels to develop existing and new products and thus achieve optimum customer value. Question and complaint handling is also one of the most important aspects of the BinckBank customer experience. BinckBank’s customer service desk is designed to provide fast, appropriate, and pleasant responses to the questions and complaints from customers.

16 ABOUT BINCKBANK

17 ABOUT BINCKBANK

NOTABLE EVENTS

JANUARY FEBRUARY MARCH

15 BinckBank lance 19 BinckBank annonce Binck aen Binck aing ale ink et Manageent

26 BinckBank loe ate fo Dtc actie ineto

APRIL MAY JUNE

20 BinckBank lance iien einetent eice fo Dtc tock 29 ale of ink et Manageent colete

JULY AUGUST SEPTEMBER

13 BinckBank o

30 incen aointe a eioy Diecto

OCTOBER NOVEMBER DECEMBER 6 BinckBank lance Binck ie 11 BinckBank a ean bank fo te enc aket to Binck ainglatfo 9 BinckBank aae it aco fo bet online aet anage 17 BinckBank an ao agee on ecoene allca blic 20 BinckBank ono te oﬀer for all BinckBank shares. Belgian cycling ace BinckBank laic in te coing yea

18 ABOUT BINCKBANK

INFORMATION FOR THE SHAREHOLDER

BinckBank attaches great importance to a transparent and consistent information policy and actively seeks dialogue with its shareholders. It communicates openly with investors and others with a stake in the company (financial or otherwise). The purpose of this is to provide clear and timely information about the policy, the company’s developments and its outlook so that they can make well-considered investment decisions. All relevant information, such as the annual report, half-yearly reports, quarterly reports, analyst presentations, and background information, is available on the corporate website www.binck.com.

The BinckBank share is listed on Euronext Amsterdam and is listed on the Amsterdam Smallcap Index (AScX).

ISIN code: NL0000335578 Reuters: BINCK.AS Bloomberg: BINCK.NA

SHAREHOLDING The following shareholders hold an interest of 3% or more in BinckBank (position on 28 February 2019):

Shareholder Last calculated interest

Boron Investments > 5%

NN Group N.V. > 3%

Navitas B.V. > 5%

Amiral Gestion > 3%

Dimensional Fund Advisors LP > 3%

Magnetar Financial LLC > 3%

19 ABOUT BINCKBANK

KEY FIGURES FOR BINCKBANK SHARES

2018 2017 2016

Net result per share (IFRS) € 0.53 € 0.13 € 0.07

Adjusted earnings per share € 0.53 € 0.52 € 0.45

Dividend per share* € 0.13 € 0.26 € 0.23

Earnings per share € 0.53 € 0.13 € 0.07

Dividend yield in % (based on year-end closing quote) 2.10% 5.90% 4.20%

Net asset value € 5.98 € 5.85 € 5.59

Year-end share price BinckBank N.V. € 6.09 € 4.43 € 5.50

P/E ratio 11.49 8.52 12.22

* 2018 figures are subject to approval of the General Meeting.

SHARE CAPITAL

2018 2017 2016

Authorised ordinary shares 100,000,000 100,000,000 100,000,000

Cancelled treasury shares during the year - 3,500,000 -

Issued shares at year-end 67,500,000 67,500,000 71,000,000

Treasury shares held at year-end 731,484 767,419 5,281,525

Number of priority shares 50 50 50

Average number of shares outstanding during the year 66,757,262 66,472,824 67,578,245

Market capitalisation year-end 411,075,000 299,025,000 390,500,000

SHARE PRICE AND VOLUMES

2018 2017 2016

Closing price € 6.09 € 4.43 € 5.50

Highest price € 6.18 € 5.69 € 7.90

Lowest price € 4.09 € 4.04 € 4.07

Share turnover 70,869,746 44,863,643 65,675,191

Daily turnover – high (number) 7,252,947 907,890 2,341,873

Daily turnover – low (number) 33,586 35,743 41,015

Average daily turnover (number) 277,921 175,936 255,546

20 ABOUT BINCKBANK

RESERVE AND DIVIDEND POLICY

INTRODUCTION BinckBank’s authorised capital consists of ordinary shares and 50 priority shares, each with a nominal value of € 0.10. The priority shares are unlisted registered shares and are held by Stichting Prioriteit Binck (hereinafter, the Priority). BinckBank’s articles of association stipulate that – if and insofar as profits permit – a sum of six per cent (6%) is paid out on the priority shares, based on the nominal amount of those shares (50 x € 0.10 x 6%). The Priority determines the extent to which the profits are transferred to reserves. The remaining profit is placed at the disposal of the general meeting. Any amounts not distributed will be transferred to BinckBank’s reserves. BinckBank’s Executive Board is authorised to pass a resolution for BinckBank to pay an interim dividend with the prior approval of the Priority.

BinckBank operates the following principles for dividend payments.

• Sustainability and prudence are preconditions for making dividend payments, determining their level and the form in which they are made. • Dividend payments must comply with the applicable laws and regulations (including those set by the European Central Bank (ECB) and De Nederlandsche Bank (DNB)). • Dividend payments must be judged as being responsible from the perspective of sustainability and prudence and based on the solvency position and economic outlook. • If a dividend is proposed to the general meeting, BinckBank aims for a payout ratio of 50% of the (adjusted) net result. • Dividend payments are made in cash and are payable no later than fourteen days following the resolution. • Interim dividend is paid from the net profit of the current financial year.

BinckBank continuously evaluates its reserves and dividend policy and discusses this policy annually as a separate agenda item at the general meeting.

DIVIDEND PROPOSAL FOR 2018 The offer price of the public offer of Saxo Bank has taken account of dividends (cum-dividend). For that reason, the Stichting Prioriteit has determined in accordance with article 32, paragraph 3 of the articles of association that the entire 2018 result, after deduction of the distributed interim dividend, will be added to the reserves. As a result, no final dividend will be paid for 2018.

21 REPORT OF THE EXECUTIVE BOARD

From left to right: Evert-Jan Kooistra, Vincent Germyns and Steven Clausing. REPORT OF THE EXECUTIVE BOARD

DEVELOPMENTS IN 2018

BinckBank made good progress this year with its relaunch of BinckBank, focusing on marketing our new services in the area of ‘Laten Beleggen’ (Invest for Me) and consolidating our position in the area of ‘Zelf Beleggen’ (Personal Investment). We have invested in the brand and strengthened our positioning and from now on we will solely operate under the BinckBank brand. A lot of time and energy was also invested in making the organisation more effective, amongst others with increased focus on cost control and the further rollout of the agile way of working. In the second half of 2018 we entered into discussions with Saxo Bank and in December we concluded that in Saxo Bank we had found a good strategic partner for the future.

SAXO BANK’S OFFER On 17 December 2018, BinckBank and Saxo Bank announced that they had reached conditional agreement (the Merger Protocol) on a recommended all-cash public offer (the Offer) by Saxo Bank for BinckBank’s entire issued and outstanding share capital (the Shares) of € 6.35 per share in cash (cum dividend) (the Offer Price). The Offer Price values 100% of BinckBank’s Shares at € 424 million. The Offer Price represents a premium of 35% compared to the closing price of 14 December 2018, and a premium of 42%, 43%, and 38% respectively compared to the volume-weighted average price per share for the last one, two, and three calendar months prior to the announcement. Once unconditional, the Offer will provide BinckBank’s shareholders with immediate, secure and significant value.

As announced in the Q3 2017 trading update of 23 October 2017, BinckBank has in recent years explored the possibilities of accelerating the ‘Relaunch’ phase of the transformation, in cooperation with other parties, while at the same time realising economies of scale. This would also enable BinckBank to create an even better starting position if consolidation were to occur in the sector. In recent years, BinckBank and Saxo Bank have regularly discussed various options for cooperation, including exploring a potential cooperation in one or more specific countries and / or a combination of the two companies by entering into a strategic transaction. However, until recently, these discussions did not lead to any concrete agreement on the structure and conditions of such a potential transaction. On 18 May 2018, the CEO of Saxo Bank sent an initial letter of interest to the chairman of the board and the chairman of BinckBank’s Supervisory Board, which contained an invitation to discuss further a combination of BinckBank and Saxo Bank.

Strategic rational The online trading and brokerage sector is currently facing multiple challenges including challenging competition, increased regulation, low interest rates, considerable technology investment requirements and changing customer behaviour. Such dynamics require proactive and decisive strategic actions. Scale, diversification, state of the art technology, relentless customer focus and multi-asset capabilities are becoming ever more important to deliver customer and shareholder value. Both parties believe that the combination of BinckBank and Saxo Bank represents a powerful response to market dynamics and has a number of strategic benefits including:

• Strong cultural fit with a shared vision of democratising trading and investment and a philosophy centered around customer service, transparency, simplicity and innovation; • Excellent complementarity in geographic footprint, product offerings and customer base, covering the full retail customer spectrum from mass retail to high-end; • Combination of Saxo Bank’s industry leading technology platform and product suite with BinckBank’s large customer base and strong distribution capabilities; • More balanced revenue mix for the combined company balancing net interest income, fee & commission income and spread income; • Enhanced economies of scale at a time of rising technology investment requirements and regulatory costs; • Enhanced career opportunities for employees in a larger, more modern and digitally oriented, international financial services group.

23 REPORT OF THE EXECUTIVE BOARD

Recommendation and support Consistent with their further fiduciary responsibilities, the BinckBank executive and Supervisory Boards, with the support of their financial and legal advisers, have carefully reviewed the Offer, as well as the possible alternatives for BinckBank and the associated risks, challenges and uncertainties. Both boards have unanimously concluded that the Offer is in the long-term interests of BinckBank, the continued success of its business, and its customers, employees, shareholders, and other stakeholders. BinckBank’s executive and Supervisory Boards therefore unanimously support the transaction and recommend that shareholders accept and vote for the resolutions relating to the Offer at BinckBank’s general meeting, which will be held during the acceptance period. Both boards will publish a reasoned position paper before the general meeting. The relevant resolutions of BinckBank’s executive and Supervisory Boards are conditional until the advisory process with the works council has been completed.

CUSTOMER INTIMACY Since its inception, BinckBank has always put the customer first and achieved high levels of customer satisfaction. But the relationship with customers goes beyond that. Customer intimacy is all about the belief that it is vital to identify customers’ needs before trying to meet them. A strong relationship grows through improving existing services and developing new products and services in partnership with customers. We take our customers’ wishes and requirements as the basis for determining our position and setting our agenda for developing new products and services. In 2018, new investments were made in the area of customer intimacy. We set up the Binck UX Lab in which we can interview customers about their experiences – and complaints – about BinckBank’s products and services. More than ten sub-areas were investigated and we interviewed existing and potential customers. We also strengthened the UX & Design team with a User Researcher and Customer Journey experts and invested in special software to collect and analyse customer data. Other projects that were key to customer intimacy in 2018 include the introduction of the new trading application ProTrader (360), the further development of mobile websites, and the introduction of new websites (MVC).

FOCUS ON NEW PRODUCTS In the autumn of 2013, BinckBank announced that it would continue to focus on its Retail core activities (B2C) and reduce its interests in professional services activities (B2B) and various associates. At the start of 2014, BinckBank reappraised its strategic objectives for the Retail business in 2018. A first strategic priority set at the time was to expand the services outside the online brokerage chain. The ‘9-grid’ strategic product framework was developed in 2015 as a structure to implement this. Within this product framework, BinckBank has developed a range of new services in recent years. For example, Binck Comfort was introduced in Belgium at the end of 2016 and in the Netherlands Binck Forward was introduced in April 2017 and Binck Comfort in September 2017. During 2018, the introduction of ‘Binck Sparen’ in the Netherlands and ‘Binck Vie’ in France largely concluded the expansion of the services planned at the time. With the introduction of Binck Comfort in Belgium and Binck Vie in France, BinckBank has strengthened its existing international footprint.

BRAND POSITIONING Although the two brands in the Netherlands (Alex and Binck) were initially positioned to set themselves apart by focusing on the different needs among investors, work was carried out in 2018 on a renewed (uniform) – and broader – brand positioning for homogeneity within the existing geographical footprint. As a result, BinckBank decided to a phased in rebranding of the underlying brands Binck and Alex to ‘BinckBank’. International research shows that this further strengthens the brand attributes of safety and reliability in particular. Sponsoring and lending our name to the BinckBank Tour also helps to distinctively bring our brand to the attention of a wider target group and fits in with the broadening of our services.

NAVIGATOR ROLE Customers are looking for a reliable partner that enables them to preserve and grow their capital. With its new product range of Binck Comfort, Binck Forward, and Binck Select, BinckBank is excellently positioned for this purpose. To support customers in making choices, a first version of the navigator was developed in 2018. This is a product selection functionality on the website that helps customers to choose within BinckBank’s product offering. With this development, BinckBank shares its knowledge of securities transactions and asset management with its customers. In future, this product selection functionality can be further developed into a complete navigation functionality for customers, enabling BinckBank to further expand its role as a partner in independence.

24 REPORT OF THE EXECUTIVE BOARD

FOCUS ON DISTRIBUTION BinckBank wants to increasingly offer its services with the help of partners, with ever more focus on the distribution of services and less on the development of its own products. A central premise here is that BinckBank intends to earn more from the fact that new technology and/or financial service providers will have access to the BinckBank platform and its customers, with customers able to choose for themselves which services to purchase. BinckBank can provide added value because it oversees the entire chain, both in terms of execution-only services and asset management, and has its own platform and a substantial customer base. This lends itself well to opening up to third parties, which will be given the opportunity to offer their services within BinckBank’s online environment. In 2018, BinckBank continued to work on opening up its platform by investing in API technology and entering into partnerships with parties that supply front-end trading software. The partnerships with ProRealTime and zonebourse in France are an example of this, as is the earlier partnership with UBS with regards to the Binck turbos.

TRANSFORMATION OF THE EARNINGS MODEL During 2018, BinckBank began to focus more on the sale of the newly developed services to achieve a more balanced revenue stream. Although good progress has been made in this area, the mix of 66% of income from savings and asset management activities on the one hand, and from BinckBank’s interest rate related operations on the other hand, which was the target at the time (2014), was not achieved by the end of 2018. The fact that the desired mix has not yet been achieved is due partly to conditions on the money and capital markets and partly to it being difficult to accelerate direct growth with newly developed online asset management products because they have no performance track record. Despite the difficult climate, BinckBank managed to attract € 170 million in managed assets in its new products. The margins within BinckBank’s interest rate related operations continued to suffer from the negative interest rates on the money and capital markets. Positive steps were taken in 2018 in other areas that contribute to transforming the earnings model from a ‘transaction-based income model’ to a ‘transaction, subscription, and asset-based income model’. For Dutch customers in the ‘Zelf Beleggen’ (Personal Investment) segment, for example, the service has been further personalised, with the introduction of a new price plan and several investment offerings. The reasoning behind this is the more investment activity, the more favourable the rates. This was well received by the market and contributes towards higher customer satisfaction among the more active customers and a stronger position in the competitive arena. The introduction of reduced transaction prices combined with a service fee in the Netherlands improves BinckBank’s competitiveness among active investors and provides it with a more stable revenue stream that better reflects actual costs. The number of customers choosing to participate in the securities lending programme grew steadily in 2018. A significant portion of current customer portfolios is available for lending, which makes the offer attractive to borrowers and enables our customers and BinckBank to benefit increasingly from the service. BinckBank’s turbo is now also making a substantial contribution to the continuous revenue stream. By eliminating transaction costs, BinckBank has made trading in Binck turbos more attractive to current and new customers, and has also stabilised its revenue stream because it no longer depends on transaction fees but instead receives a fee based on the outstanding volume.

OPERATIONAL EXCELLENCE BinckBank’s objective is to maximise the efficiency of its existing infrastructure by settling as many transactions as possible and administering and/or managing as many assets as possible. The central ICT infrastructure and the central back office are important starting points for this. All transactions for the Dutch, Belgian, French, and Italian branches are settled on this central infrastructure. Work on the European base platform has been ongoing since 2012 and several initiatives have been taken to elevate the bank to a higher operational level. The Italian activities started on this platform in 2012. At the end of 2013, the Belgian activities migrated to the European base platform, followed by the French retail activities in 2015. Preparations were made in 2018 for the migration of services to independent asset managers. These services are expected to migrate in the second half of 2019.

FOCUS ON CORE ACTIVITIES BinckBank has already stated that it will continue to concentrate on its core activities. Over the past years, it has initiated a process aimed at focusing on the retail business and the distribution role that BinckBank plays in it. In this context, BinckBank began phasing out its services for business process outsourcing (BPO) customers. By the end of 2017, agreements were reached with all four BPO customers on the downscaling services and services were then discontinued completely in 2018, enabling the BPO activities to be phased out.

In October 2016, the shareholders of TOM Holding N.V. announced that they were seeking a buyer for the trading platform. After discussions at the end of 2016 and the beginning of 2017 failed to produce a sale, the TOM service was wound down in 2017 and the business activities were discontinued. TOM Holding N.V. was liquidated in 2018.

25 REPORT OF THE EXECUTIVE BOARD

On 19 January 2018, BinckBank announced the intention to sell its 60% holding in Think ETF Asset Management B.V. (Think) to Van Eck Associates Corporation. The sale was finalised at the end of the second quarter of 2018. After the sale of Think ETF Asset Management B.V., BinckBank can now focus fully on the relaunch of its Retail activities.

LEGISLATION AND REGULATION BinckBank devoted a great deal of time and energy to implementing new laws and regulations in 2018. The largest projects among these were MiFID II and GDPR. MiFID II (Markets in Financial Instruments Directive II), which is a revised version of the European MiFID directive previously introduced in 2007, came into force on 3 January 2018. MiFID II aims to enhance investor protection and make European financial markets more efficient and transparent. The GDPR (General Data Protection Regulation) leads to one legislation applicable for the European Union, which is why it is also referred to as the European Privacy Regulation. The Regulation broadly improves people’s privacy rights and increases the responsibilities of organisations (with associated sanctions). The key concepts in the GDPR are privacy and personal data.

BREXIT BinckBank has taken stock of the impact and consequences of Brexit. BinckBank does not provide financial services in the United Kingdom. The impact of any ‘hard Brexit’ is limited to the services procured from third parties operating from the United Kingdom. These services include monitoring, reporting, and settling transactions – the latter only to a limited extent. For all these services, we are working on a solution and looking for alternatives so that day-to-day operations are not disrupted if there is a ‘hard Brexit’.

BINCKBANK IN THE MEDIA In the first half of 2018, BinckBank organised a range of activities designed to help its customers with their asset accumulation. In cooperation with the FD Media Group, BinckBank hosted the second and well-attended Personal Finance Day in the Netherlands on 30 May, while in Italy, BinckBank participated in the annual Trading Expo in Rimini.

Since 2017, BinckBank has been the main sponsor and lent its name to the BinckBank tour, a multi-day UCI World Tour cycling race in the Netherlands and Belgium. BinckBank has agreed to associate its name with this professional sports event for five years. For the next four years, BinckBank has also lent its name to the E3 BinckBank Classic cycling race around Harelbeke. This unique one-day race, which starts and finishes in the same city, has been organised for more than 60 years and marks the start of the Flemish Cycling Week. Sponsored cycling offers an excellent opportunity to meet our customers in an informal setting and is an interesting way of distinctively bringing the BinckBank brand to the attention of a wider target group. August 2018 saw the rollout of the new television campaign in which BinckBank emphasises its role as a ‘partner in independence’. This is in keeping with our new financial services ‘Laten Beleggen’ and ‘Sparen’, which enable BinckBank to provide comprehensible and accessible products.

OBJECTIVES In 2014, BinckBank defined term targets for the end of 2018. The achievement of these targets at the end of 2018 is set out in the table below. In conclusion, the target for the assets under administration was achieved, while the other targets were missed in 2018 due to very challenging market conditions.

REALISATION REALISATION REALISATION TERM TARGETS 2019 TARGET 2019 YEAR-END 2018 YEAR-END 2017 YEAR-END 2016

Customer satisfaction >=8 weighted-average 7.4 weighted-average 7.5 weighted-average 7.3 weighted-average

Number of transactions 11.0 million 9.9 million 7.7 million 7.7 million

Assets under administration € 21.0 billion € 24.4 billion € 26.0 billion € 22.8 billion

Assets under management € 3.5 billion € 0.9 billion € 1.1 billion € 1.3 billion

Cost/income ratio <65% 81% 81% 79% (excluding IFRS amortisation)

More balanced income flow >66.6% 43.7% 39.4% 35.6%

26 antal e afeling REPORT OF THE EXECUTIVE BOARD

etail I ble eation taen NOTESen oeigTO THE CONSOLIDATED RESULT FOR 2018 et inteet incoe et fee an coiion incoe

109.1 32.1 105.9 103.0 30.0 26.3 illion illion

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27 Inteet geneating aet

0.4 0.6 0,6 by conty Malefeale atio eeling ano 0.5 0.7 0,8 by conty Malefeale atio eeling ano ollatealie lening oenoen oenoen 1.5 1.1 1,0 Eﬀectenkredieten

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eelaneelan otaalotaal otaalotaal BelgiBelgi 642642 579579 ankikankik aneane ItaliItali ItalieItalie aneane oo aneane ankikankik ItalieItalie anan antal e afeling

REPORT OF THE EXECUTIVE BOARD

etail I ble eation taen en oeig

Furthermore, the other operating income decreased as a result of the sale of Able Holding B.V. in October 2017 and the phasing-out of BPO services in 2018. The result from financial instruments, including the Binck turbos and hedge accounting results increased by 14% to € 7.0 million (2017: € 6.2 million). et inteet incoe et fee an coiion incoe

The total operating expenses for 2018 decreased by 19% from € 141.6 million to € 115.4 million compared109.1 to 2017. 32.1 105.9 103.0 Employee expenses decreased by 8% to € 48.9 million (2017: € 53.030.0 million) mainly due to a decrease in the number of FTE, 26.3 amongst others as a result of the sale of Able in 2017. Depreciation and amortisation decreased by 81% from € 26.8 million illion illion to € 5.1 million. This is the result of the intangible assets acquired in the Alex Beleggersbank acquisition being fully

amortised at the end of 2017. The other operating expenses for the year 2018 remained virtually unchanged compared to 8 8 2017. In the final quarter of 2018, the costs increased as a result of the costs incurred in connection with additional work and advisory services in the assessment of Saxo Bank’s public offer (+ € 2.4 million), additional costs for projects such as relating to regulation (+ € 1.5 million) and marketing campaigns such as for ‘Binck Vie’ (+ € 0.7 million).

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The share in results of associates includes a book profit of € 8.4 million resulting from the sale of the 60% interest in Think Inteet geneating aet ETF Asset Management B.V. in June 2018 and the amount received from the earn-out scheme from the sale of Able. 0,6 0.4 0.6 The tax charge0.5 for 20180.7 amounts to0,8 € 0.4 million, which leads to an effective tax rate of 1.1%. In 2018, the tax charge includes a one-off tax benefit of € 6.3 millionollatealie as a result lening of the application of lower corporate income tax rates on the 1.5 1.1 1,0 Eﬀectenkredieten

billion Motgage igt deferred taxes. The new rates were announced in the Tax plan 2019, in which the corporate income tax rateHypothekenportefeuilles gradually 1,2 Bon otfolio decreases from1.0 25% in 1.12019 to 20.5% in 2021. Obligatieportefeuilles Cash and balances at banks 8 Kasmiddelen en bankiers

RECONCILIATION ADJUSTED NET RESULT TO IFRS-RESULT

From the beginning of 2018, BinckBank no longer reports an adjusted result in the key figures, but only the IFRS result. In previous years, compared to the IFRS results, the total operating expenses and taxes have been adjusted for IFRS amortisation and the tax savings on the difference between the fiscal and commercial amortisation of the intangible assets acquired and goodwill paid on the acquisition of Alex Beleggersbank. At the end of 2017, these intangible assets, excluding paid goodwill, are fully amortised and the adjusted result is fully in line with the IFRS result. The key figures and comparative key figures therefore only present the IFRS result. A comparison of the adjusted result with the IFRS result is included below. This shows that no corrections to the IFRS result are applicable after 31 December 2017:

(amounts in € 000’s) 2018 2017 2016

Net result in accordance with IFRS 35,462 8,521 4,621

Adjusted IFRS amortisation - 21,515 21,515

Adjustment tax benefit resulting from the difference - 4,407 4,407 between commercial and fiscal amortisation

Adjusted result after taxes 35,462 34,443 30,543

28 REPORTVERSLAG OF THE VAN EXECUTIVE HET BESTUUR BOARD

EARNINGS MODEL

BinckBank’s income is generated through interest rate related operations (net interest income) and commission operations (net commission income). The summary below shows the earnings model for the interest rate related operations and commission operations with their underlying drivers.

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29 REPORT OF THE EXECUTIVE BOARD

NET INTEREST INCOME Net interest income is made up of interest income less interest expenses. BinckBank has a liquidity surplus because customers hold part of their investments in cash. As a result, customers’ investment and savings accounts exhibit a cash balance which is shown on the balance sheet under ‘funds entrusted’. BinckBank invests the funds entrusted as follows:

• BinckBank holds part of the funds entrusted in cash at banks as operational deposits necessary for settlement of transactions between our customers and counterparties (stock exchanges, clearing houses, and brokers). • BinckBank also uses a portion of the funds entrusted to finance customers’ collaterlised loans. BinckBank offers customers various forms of lending against securities collateral. • In accordance with BinckBank’s investment policy, the remainder is divided between: • the investment portfolio, consisting of bonds issued by banks and government bonds or government-guaranteed bonds • he investment in mortgage rights on Dutch residential mortgages.

These components above jointly generate interest income for BinckBank.

Interest expenses are determined by the total amount of funds entrusted by customers and the applicable interest rate conditions and interest charges on cash positions held and interest rate swaps.

EVOLUTION OF INTEREST ON INTEREST-GENERATING ASSETS Interest rates on the money and capital markets were once again low to very low in 2018. BinckBank derives its income in the interest rate sensitive operations from: a) cash held at the central bank b) collateralised loans (lending against securities collateral), c) investment portfolio and investments in Dutch residential mortgages.

Interest income on cash held at the central bank was negative in 2018 (-0.4%). Collateralised loans evolved positively during the 2018 financial year, increasing from € 567.0 million at 31 December 2017 to € 604.3 million at 31 December 2018. The average return in 2018 was 3.4%, in line with 2017. The mortgage portfolio increased slightly from € 736.7 million at 31 December 2017 to € 804.6 million at 31 December 2018. During 2018, BinckBank held intensive discussions with relevant experts and stakeholders about the maximum size and further growth of the mortgage portfolio. The conclusion for now is that BinckBank, with its current balance sheet composition and taking into account its existing capital structure and short-term liquidity requirements, sees no possibility of increasing the mortgage portfolio beyond its current value of around € 800 million.

NET COMMISSION INCOME The net commission income comprises:

• transaction-related commission income, • recurring asset management fees, and • other commission income.

The transaction-related commission income is determined by the volume of transactions and the average income per transaction. The transaction volume that BinckBank processes for its customers depends on the number of customers (the number of securities accounts) and the level of activity among these customers. The level of activity is determined by investor sentiment, which in turn largely depends on the volatility and direction (rise or fall) of financial markets. The average income per transaction depends on BinckBank’s pricing structure, the value of the securities being traded, and the exchange and clearing costs that BinckBank is charged for settling the transaction.

The recurring asset management fee is determined by the amount of assets that BinckBank manages for its customers, the asset management fee, and any performance fees.

The other commission income consists of recurring payments for various services. Their level is determined by the number of underlying service contracts, the number of concluded subscriptions, and their applicable rates.

30 REPORT OF THE EXECUTIVE BOARD

EVOLUTION OF TRANSACTION VOLUME AND AVERAGE INCOME PER TRANSACTION Transaction volumes evolved positively during the 2018 financial year, with the number of transactions increasing by 28% from 7.7 million in 2017 to 9.9 million in 2018. However, the average income per transaction fell from € 10.21 per transaction in 2017 to € 7.73 per transaction in 2018. This is mainly because adjustments have been made to BinckBank’s earnings model in order to remain competitive. In this revenue model, BinckBank receives a fixed service fee in addition to the transaction fee. Since the end of 2017, BinckBank has been offering free trading in Binck turbos. By eliminating the transaction costs, BinckBank is making trading in Binck turbos more attractive to its customers and has strengthened its market position. Since then, the costs for trading in and maintaining these turbos for Dutch customers still primarily consists of the financing interest that is intrinsic to the product. BinckBank derives its earnings from a remuneration based on the outstanding financing level. BinckBank’s goal with this is to achieve higher and more stable revenues from its turbo activities. For ‘Zelf Beleggen’, we introduced a new price plan in the Netherlands in 2018 with several investment packages tailored to the varied needs of our customers. The reasoning behind this is the more investment activity, the more favourable the rates.

EVOLUTION OF ASSETS UNDER MANAGEMENT Assets under management are an important income pillar for BinckBank. Binck Select (formerly Alex Vermogensbeheer) also had to deal with an outflow of customer funds in 2018. The assets under management for Binck Select fell in 2018 to € 0.7 billion. Although the Binck Select asset management product has improved considerably in recent years, it has still suffered reputational damage. The ongoing drain of managed assets from Binck Select remains the biggest challenge for meeting our strategic growth target for assets under management. During 2018, the influx of assets from the newly launched products (Binck Comfort, Binck Forward, Binck Pension) was substantial, but still not sufficient to fully offset the outflow of assets from Binck Select, so on balance there was a negative movement in the total assets under management. Putting a stop to the drain of assets from Binck Select will also have BinckBank’s full attention in 2019.

31 REPORT OF THE EXECUTIVE BOARD

BINCKBANK’S OPERATIONAL STRUCTURE

BinckBank has a central Back Office and ICT & Network infrastructure. The Back Office and ICT & Network infrastructure are located in Amsterdam and from this base, infrastructure services are provided to the local branches of BinckBank in Belgium, France, Italy, and Spain. BinckBank invests continuously in the stability of the various trading platforms. BinckBank’s trading platform has proven itself over time by coping with all peak periods with no significant problems. BinckBank has set up a fully equipped disaster recovery environment for Business Continuity purposes. There is an annual contingency test to check the transition from the production environment to the disaster recovery environment. Corporate functions such as Finance & Accounting, Treasury & ALM, Internal Audit Department, and Governance & Risk Management are also mostly centralised. The central organisation of operational and corporate functions makes BinckBank’s business model scalable.

OPERATIONAL STRUCTURE

Network connections with exchanges, Backoﬃce + ICT & Central platform clearing network infrastructure for transaction processing organizations in Amsterdam (Economies of Scale) and other brokers

Netherlands Belgium France Italy Spain Branche Branche Branche Branche Branche Marketing, sales & distribution of services in commercial branches

The local branches mainly consist of the following functions: Marketing & Sales, Customer Service & Order Desk, Legal, Compliance, and Internal Control. Services from branches in Amsterdam, Antwerp, Paris, Milan, and Marbella are provided mostly online via BinckBank’s websites. The internet and media such as television and radio are therefore BinckBank’s most important distribution channels.

32 REPORT OF THE EXECUTIVE BOARD

BINCKBANK’S COST STRUCTURE BinckBank has a relatively fixed operational cost base, with costs showing only a limited correlation with income. Factors that influence operating income will not necessarily have a proportionate impact on costs. To be successful, BinckBank therefore needs to set up an efficient and effective operational structure that ensures costs are controlled. The cost/income ratio is used as an important indicator to measure cost control. It should be noted that this ratio is influenced both by the level of costs and the level of operating income. BinckBank aims to gain more flexibility in its cost structure by entering into partnerships for new products. Part of the fixed-cost base will then be bourne by third parties. BinckBank controls these costs through a budget process and cost-conscious managers.

BinckBank has three major cost components:

• Employee expenses. This item consists of salary costs, social security charges, pension costs, profit-sharing, performance- related bonuses, and other employee expenses. The level of employee expenses depends on the number of employees and the pay structure. Through an agile way of working, BinckBank tries to assign its staff efficiently and effectively. • Depreciation and amortisation. This item includes depreciation of immovable property and equipment and amortisation of intangible assets. • Other operating expenses. This item consists of costs for marketing, ICT, audit and professional services, housing, communication and information providers, and other miscellaneous overheads. The miscellaneous overheads item includes office costs, banking costs, insurance, costs of and contributions towards bank supervision, service costs for mortgages, and movements in provisions.

33 REPORT OF THE EXECUTIVE BOARD

STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS (SWOT ANALYSIS)

BinckBank performs a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to map out the characteristics of the organisation and its environment. The SWOT analysis is used as a basis for developing BinckBank’s strategy. The strengths and weaknesses reflect the internal elements. The opportunities and threats indicate external developments, events, and outside influences that affect BinckBank.

STRENGTHS (INTERNAL) WEAKNESSES (INTERNAL) • Solid customer base and strong brand name and • Dependence on volatile transaction income. therefore good distribution opportunities for existing and Transition to a new, more stable earnings model is new investment and savings products. time-consuming. • Very user-friendly websites and mobile applications • Relatively small group of very active customers within with real-time prices, comprehensive information, and online brokerage. investor tools. • High fixed-cost base (governance and infrastructure). • High service level. Customers appreciate our proactive • Technological developments require significant and fast service. investments in the ICT infrastructure. • Strong customer intimacy is created by providing services • Maintenance projects and projects for legilsation and through local branches. regulation call for a lot of ICT capacity. • Local tax compliance is incorporated into systems and a • Not big enough to maximise benefits of scale in the component of local customer service. short term. • Robust financial position and conservative risk monitoring. • Outflow of managed assets from asset management. • Central back office and ICT infrastructure with ample expertise and knowledge of securities transactions.

OPPORTUNITIES (EXTERNAL) THREATS (EXTERNAL) • Consumers are becoming increasingly aware that they • Falling trading volumes, increasing competition for need to take a hands-on approach to accumulating ‘Zelf Beleggen’. The online brokerage market is undergoing private capital and providing for themselves in later life. a significant change, by which brokerage is becoming a • Technological developments present opportunities to commodity and customers are increasingly unwilling to offer new investment and savings services that cater to pay extra for quality of service. customers’ needs. • Increased transparency (MiFID II) puts pressure on product • Potential to generate extra revenue on funds entrusted margins throughout the chain. by customers as soon as the interest rates on money • Increasing duty of care of banks could increase the risk of and capital markets increaset. customers’ legal claims. • New laws and regulations, such as PSD2, offer • Consistently negative interest rates on money and opportunities for further expansion of the business capital markets. model over time. • Continuous upward pressure from regulators on the • Interesting party for consolidation through good available capital. The capital requirements imposed on positioning, footprint and stability. banks are constantly increasing. • Increasing complexity of legislation and regulation creates continuous upward pressure on operational costs (internal control and compliance costs).

34 REPORT OF THE EXECUTIVE BOARD

Opportunities for BinckBank

Online financial services in investments and savings are expected to grow strongly in the coming years. Consumers are becoming increasingly aware that they need to take a hands-on approach to accumulating private capital and providing for themselves in later life. Passive investments and investments with a longer horizon are becoming increasingly popular.

With its solid customer base in five European countries, BinckBank is well-positioned to benefit from this trend. And with its strong brand name, existing and new products, customer-oriented service, high level of service through local branches, and country-specific tax compliance in its systems, it knows how to attract customers. In recent years, BinckBank therefore has been able to build up strong customer intimacy in the countries in which it operates.

Diverse technological developments also present opportunities to offer new investment and savings services that cater to customers’ needs. At the end of 2015, BinckBank introduced a strategic product framework as part of ReThink Binck. Progress has since been made in developing and launching new products and services in the three segments of the strategic product framework, and in implementing improvements in the services provided to our customers. The new products increase BinckBank’s future opportunities.

As soon as interest rates on the money and capital markets rise, BinckBank has the opportunity to make an extra return on funds entrusted by customers. As BinckBank’s investments are mainly short-term, they can be reinvested fairly quickly at higher market interest rates in a rising interest-rate scenario.

Some market developments also offer opportunities. New laws and regulations, such as PSD2, offer opportunities for further expansion of the business model over time.

Industry trends and challenges

The market conditions in which BinckBank conducts its business activities are extremely challenging. Declining trading volumes (market sentiment/volatility) and competition (price pressure) also apply pressure to the net commission income. There is strong competition not only in the Trading segment (online brokerage), but also on the recently entered Investing segment (online asset management), where various players are active and the range of competitive services is considerable. More and more parties are emerging in the market with online asset management solutions.

Within the Trading segment, most transactions are generated by a relatively small group of very active investors. This strong dependence on a small group of customers makes BinckBank vulnerable. And the rise of online brokers with a zero-fee commission model is also a serious threat to the income from BinckBank’s Trading segment. As a result of newly introduced laws and regulations (e.g. MiFID II), we also see there is greater transparency regarding the margins of products throughout the chain. This increased transparency leads to pressure on the earnings model. Changes by regulators to maximum gearing on leveraged products also have a dampening effect on banks’ earnings from these products.

Interest rates on the money and capital markets are very low to even negative. Since the earnings model largely depends on the interest rates on these money and capital markets, this has a significant effect on BinckBank’s earning capacity.

BinckBank’s operational structure has a high fixed-cost base. Maintenance projects and the construction of new product functionalities require significant ICT capacity. Technological developments in the sector are fast-moving, which means that BinckBank must continue to invest in its ICT infrastructure. Increasing complexity of legislation and regulation (MiFID 2, AML, KYC, FATCA, etc.) also leads to rising operational expenses. With the high fixed-cost base, it is difficult to compete with zero-fee online brokers, for example, which are operating on the European continent without a banking licence and the associated cots. The risk that BinckBank may not be able to achieve sufficient scale to keep costs at a sustainable level in the longer term should also be taken into account. The critical (minimum necessary) mass is difficult to determine, but is expected to exceed the current level of business activities.

Increasing duty of care, laws and regulations result in ever higher costs for BinckBank. From this point of view too, scale is important to be able to operate cost-efficiently in the longer term.

We are experiencing continued upward pressure from regulators on the capital requirements. The standard for the Supervisory Review and Evaluation Process (SREP) is rising every year. Higher capital requirements combined with a squeezed earnings model can put pressure on shareholders’ returns in the longer term.

35 REPORT OF THE EXECUTIVE BOARD

Experience in recent years has shown that the transition to a new, more stable earnings model takes longer than initially anticipated. The outflow at Binck Select (previously Alex Vermogensbeheer) is continuing somewhat longer than expected, significantly impacting the growth in a major pillar of the earnings model: the assets under management. The transition to the new business model also requires substantial investments in new products and services, which must be made in the same period when interest and commission income are under pressure. The dividend expectations shareholders have of BinckBank as a listed company also require a continuous balance between short-term returns and investments in long- term value creation. The key question is whether BinckBank will have sufficient time, given current market conditions and if it continues its business operations independently, to create more scale in order to remain cost-efficient in the longer term and further strengthen the commercial base. Both are needed to enable BinckBank’s consistently pressurised profitability to grow structurally and predictably again.

So, what has BinckBank done in recent years to tackle these challenges?

DEVELOPMENT OF NEW PRODUCTS At the end of 2015, BinckBank introduced a strategic product framework as part of ReThink Binck. Progress has since been made in developing and launching new products and services in the three segments of the strategic product framework, and in implementing improvements in the services provided to our customers. Various new products and functionalities for customers have been developed within the Trading segment, including online account opening, the introduction of the new trading application ProTrader (360), the further development of mobile websites, and the introduction of new websites (MVC). Various products are also being developed within the Investing segment. After first being launched in Belgium at the end of 2016, Binck ‘Laten Beleggen’ was brought to the Netherlands in September 2017 under the label Binck Comfort. In March 2018, BinckBank introduced an innovative savings concept for the Dutch market and a new asset management product, ‘Binck Vie’, for the French market in November 2018. These new products increase BinckBank’s earning capacity.

IMPLEMENTING ADJUSTMENTS IN THE EARNINGS MODEL BinckBank has made various adjustments to its earnings model to strengthen its competitiveness. As from the end of 2017, BinckBank has been offering free trading in Binck turbos. In the Netherlands, BinckBank has reduced the transaction fees for the popular Binck turbo to zero. By eliminating the transaction costs, BinckBank is making trading in Binck turbos more attractive to its customers and has strengthened its market position. Since then, the costs for trading in and maintaining these turbos for Dutch customers still primarily consists of the financing interest that is intrinsic to the product. BinckBank’s goal with this is to achieve higher and more stable revenues from its turbo activities.

In 2017, BinckBank also introduced securities lending for its customers. By choosing the securities lending service, customers accept that the securities in their portfolio can be lent out to another party. In exchange for this loan of the securities, the customers are paid a fee that allows them to improve the return on their investments. Securities lending increases BinckBank’s earning capacity.

For ‘Zelf Beleggen’, we introduced a new price plan in the Netherlands in 2018 with several investment packages tailored to the varied needs of our customers. The reasoning behind this is the more investment activity, the more favourable the rates. This was well received by the market and contributes towards higher customer satisfaction among the more active customers and a stronger position in the competitive arena.

36 REPORT OF THE EXECUTIVE BOARD

OPTIMIZATION OF THE OPERATIONAL STRUCTURE In recent years, we have invested heavily in the optimization of the European base platform. After the migration of the Independent Investment Managers in early 2019, all operational activities will be on one and the same ICT platform. By implementing all activities on a European base platform, economies of scale can be achieved and operating costs kept as low as possible.

In recent periods, investments have also been made in the set-up of so-called multidisciplinary ‘customer teams’ that develop products and services with the focus on the customer and the ‘agile’ way of working has been implemented within the organisation. The frequency of the number of software releases has increased, so that the use of newly developed functionalities can take place more quickly. Good service and systems are important for our customers. In the past year, therefore, we have again been fully committed to further improving our IT systems. BinckBank continuously invests in future-proofing of its IT architecture and the quality of the data used within the organisation. In recent years investments have been made, among other things, in new smaller and environmentally friendly data centers, as a result of which the operational costs of the data centers are lower, performance is improved and energy consumption has decreased.

Furthermore, we worked on the reprogramming of the IT structures in a new modern software language, a more modular structure of the software platform and the building of ‘Application Programming Interfaces’ (APIs) to give third parties access to our platform.

CHANGE BALANCE SHEET COMPOSITION BinckBank has been investing in Dutch residential mortgages since 2016. BinckBank acts as a financier in a collective structure, whereby the marketing, sales, administration and duty of care are provided by an AFM licensed service provider. The investment in the mortgage portfolio stems from the objective of generating a more stable return on the interest- bearing assets. We also acquired a € 340 million mortgage portfolio from Obvion in July 2016.

APPLYING FOCUS TO CORE ACTIVITIES BinckBank has indicated in the past that it will continue to focus on its core activities and has in recent years started a process to focus on the Retail business and the distribution role that BinckBank fulfils in this. In this context, BinckBank already sold its stake in BeFrank in 2014 and has started to phase out the services to the BPO customers. The services to the four BPO customers were fully terminated and phased out during 2018.

In October 2016, the shareholders of TOM Holding N.V. indicated that they were looking for a buyer for the trading platform. After discussions did not lead to a sale at the end of 2016 and the beginning of 2017, TOM’s services were wound down in 2017 and the business activities were discontinued. TOM Holding N.V. was liquidated in 2018.

In October 2017, BinckBank and Topicus Finance Holding B.V. agreed on the sale of the shares of Able Holding B.V. Able was a 100% subsidiary of BinckBank and develops technological solutions for banks and insurers in the field of asset management, savings and investments. Since 2013, Able’s activities no longer belonged to the core activities of BinckBank.

37 REPORT OF THE EXECUTIVE BOARD

PROSPECTS AND OBJECTIVES

SAXO BANK’S OFFER FOR BINCKBANK’S SHARES On 17 December 2018, BinckBank and Saxo Bank announced that they had reached conditional agreement on a merger protocol for a recommended public offer (the Offer) by Saxo Bank for BinckBank’s entire issued and outstanding share capital (the Shares) of € 6.35 per share in cash (cum dividend). The issue and the acceptance of the Offer are subject to the fulfilment of the usual conditions for a transaction of this nature. One of the conditions for acceptance is that at least 95% of the Shares are tendered under the Offer, which percentage will be reduced to 80% if BinckBank’s shareholders adopt the resolution on the Post-Closing Merger during the extraordinary general meeting of shareholders. Saxo Bank may also unilaterally lower the minimum tender threshold of the Offer to 67% of the Shares.

RECOMMENDATION AND SUPPORT Consistent with their further fiduciary responsibilities, the BinckBank Executive and Supervisory Boards, with the support of their financial and legal advisers, have carefully reviewed the Offer, as well as the possible alternatives for BinckBank and the associated risks, challenges and uncertainties. Both boards have unanimously concluded that the Offer is in the long-term interests of BinckBank, the continued success of its business, and its customers, employees, shareholders, and other stakeholders. BinckBank’s Executive and Supervisory Boards therefore unanimously support the transaction and recommend that shareholders accept and vote for the resolutions relating to the Offer at BinckBank’s general meeting, which will be held during the acceptance period. Both boards will publish a reasoned position paper before the general meeting. The relevant resolutions of BinckBank’s Executive and Supervisory Boards are conditional until the advisory process with the works council has been completed.

INDICATIVE TIMELINE BinckBank expects the Saxo Bank offer to be issued in the short term. BinckBank and Saxo Bank expect the offer to be completed by the end of the second quarter or in the first half of the third quarter of 2019.

STRATEGY Due to the strategic transformation and our new products, we are well-positioned for BinckBank’s future growth. Negative interest rates on the money and capital markets continue to weigh heavily on net interest income and market volumes are still exhibiting a downward trend (partly because of changing trading behaviour among customers) that is putting pressure on net commission income. Increased and sustained regulatory pressure is also putting continued upward pressure on costs. The outflow at Binck Select is continuing somewhat longer than expected, impacting growth in a major pillar of the earnings model: the assets under management. This makes it difficult to achieve predictable earnings growth in the short term and a return to historical profit levels.

Financial expectations

BinckBank’s result depends heavily on external market factors and customer behaviour. The volatility and direction of the stock exchange are strong determinants, as are interest rates on the money and capital markets. As these are unpredictable, BinckBank does not make any specific forecasts.

38 REPORT OF THE EXECUTIVE BOARD

HUM AN

RESOURCES be of e conty otincoe atio 21 4 36 4 40 23 8 8 37 24 5 40 38 ain 40 Italy 541 475 ance 436 Belgi etelan 8 INTRODUCTION BinckBank is a successful international business bursting with new initiatives, a bank that creates a pleasant and informal atmosphere where the organisation and its personnel can focus on employee and customer satisfaction through solid be of e conty be of e conty otincoe atio 4 cooperation with all stakeholders. Every year, BinckBank welcomes ambitious, enterprising people who want to grow 21 otincoe atio 4 be of by eatent 36 ane further in their careers. They are what determines BinckBank’s success.21 At the end of 2018, the average age of our 4 36 40 23 8 Italie 4 37 5 8 40 23 24 8 employees was 37. 5 408 38 ain 37 24 ankik 40 38 ain 40 Italy Belgie 40 541 Italy 475 ance BinckBank has 543 FTEs in the Netherlands, Belgium, France, Italy, and541 Spain. Any time BinckBank takes on a new hire, we 8 eelan 475 ance 250 265 24 Belgi take great pains to ensure that the employee fits into the organisation, embraces our culture, and understands our 436 436 Belgi 8 etelan people. The core value ‘Empower and guide’ forms the basis for the culture and contributes90 95 88 towards the ambitions and 8 etelan 0 0 67 8 8 77 76 long-term value creation of the organisation. 54 42 38 etail I ble eation te ot

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Nederland REPORT OF THE EXECUTIVE BOARD

RECRUITMENT Many employees choose BinckBank for the ambitions and challenges. The ambitions of the company offer opportunities for knowledge development, growth opportunities, and room for individual contributions and ideas. Along with the involvement of the managers and our HR advisers, one of the most important tools in selecting the right people is the ‘Working at Binck’ website.

The shortage on the labour market is expected to continue into the coming years, particularly for certain positions in the financial sector. The success of a company thus increasingly depends on successfully recruiting and retaining talented employees. BinckBank therefore has continued to focus on recruitment in 2018 and optimised its processes in this area. BinckBank relies on its in-house recruiters and has succeeded in keeping its own recruitment rate at 94%. The use of external agencies could thus be kept to a minimum. Recruitment campaigns initiated to give more shape and attention to recruitment include recruitment initiatives at BinckBank tour locations, the organisation of an in-house tech event, a referral programme, and a focus on improving the candidate experience.

TRAINING AND DEVELOPMENT Competent, motivated, and satisfied employees are crucial to BinckBank’s success. Personal development is an individual responsibility and will therefore contribute towards trust, both internally among employees and externally among customers and shareholders. This is why BinckBank continues to invest in developing the knowledge, skills, and expertise of its employees. In 2018, the Executive Board decided to make additional investments in the personal development of the board, management, employees, and team development.

A start was made on further developing the potential within the organisation by focusing more on the issue of leadership development. To understand what is already effective, what can be improved, and where the priorities lie for personal development and growth in management skills, an external consultancy agency led the request to support the Executive Board and senior management in leadership and organisational development.

As part of developing skills in mutual relationships and creating optimal cooperation between teams, BinckBank began providing DISC training courses for teams in 2018. This DISC training is aimed mostly at gaining insight into the qualities and motives of individuals in customer teams. By doing this, BinckBank has shown that it acknowledges the importance of developing soft skills, focusing on team collaboration, good communication, and management skills as an important element in employee development. Throughout 2018, almost all team employees at BinckBank NL and Belgium participated in the training courses. There are plans to roll out the DISC initiative in our French and Italian branches in 2019.

BinckBank considers it essential to offer talented employees opportunities to develop within the organisation. In 2018, more than 52 employees progressed to a new position. In the coming years, BinckBank will continue to focus on the development and promotion of talented employees. With a continual emphasis on our training policy, we focus on staying an attractive employer. Just as in 2018, all our branches, including those in Belgium, Spain, Italy, and France will be part of this process.

EMPLOYEE SATISFACTION SURVEY (FABBS) BinckBank repeated the FABBS employee satisfaction survey in 2018. FABBS stands for ‘For A Better Binck Survey’. A modern, transparent survey geared to BinckBank’s plans and ambitions.

Our organisation is large enough to offer ambitious and talented people enough challenges. And at the same time, it is small enough to allow an individual to make a difference. No one is alone in this: working together to be a better bank for our customers is our fundamental principle. Our challenge is establishing cooperation between the individual departments and countries. The result of the employee satisfaction survey showed that our employees feel this is an area that requires continuous attention.

The survey was held among staff in all countries. The questionnaire covered important themes, plans, ambitions, and the organisational culture. The survey was completed by 79% of all employees. Of the ten themes surveyed, nine showed an improvement compared to last year. The Executive Board discussed the results of the survey with the works council.

Throughout the organisation, follow-up plans are being drawn up. We will see to it that these plans continue to be the focus of attention in the coming years. Likewise, internal communication will also play a major role in guaranteeing employee engagement. To bolster follow-up within teams, we will run a pilot scheme in 2019 using a moderated online discussion tool.

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VITALITY Sick leave in 2018 was 3.18%. This percentage decreased compared to last year (3.27% in 2017). This percentage includes several cases of long-term illness for which a reintegration process is ongoing.

To help managers handle cases of long-term illness in their department, we have facilitated a number of sessions with the occupational health and safety service. BinckBank will team up with Arbobutler as from January 2019. Cooperation will focus on developing practical knowledge and skills for those managers who need to be able to cope well even in the most trying absenteeism situations. Through interactive training courses, each manager will gain more insight into the different absenteeism processes within their team. By doing this, BinckBank is increasing focus on support for absence management so that the sick leave rate decreases or at least remains constant.

Besides the assistance provided to management, extra attention was paid during the year to health in the form of sports activities, nutrition, and stress awareness. Cooperation with the Bootcamp Club also contributed towards the organisation of sporting activities again in 2018. Bootcamp, kick boxing, and yoga sessions are organised at various times, two days a week. Participation is at all levels of the organisation. Healthy and fit employees are a must for a company with big ambitions.

Besides healthy and fit employees, BinckBank’s health programme also encourages the desired team spirit, cooperation, and sense of fun.

CONSULTATION WITH THE WORKS COUNCIL Due to its elections, the composition of the works council changed in 2018. As of the end of 2018, the works council consists of nine members.

The Executive Board and works council have held regular formal and informal meetings, described as enjoyable, informative, and transparent.

In 2018, the following projects and topics were handled or finalised together:

• Reappointment of V.J.J. Germyns • Leadership profile • Introduction of Operational Excellence in the Operations department • Changes to the pension scheme • Reappointment of S.J. Clausing • Risk Inventory and Evaluation 2018 • Change of occupational health and safety service • Saxo Bank’s proposed offer

The Executive Board once again looks forward to a constructive partnership with the works council in 2019.

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CORPORATE SOCIAL RESPONSIBILITY

INTRODUCTION BinckBank strives to offer high-quality online services in the areas of investment, asset management, and savings to help customers achieve their financial independence. Creating trust among customers is central to this. This approach contributes towards our overarching objective: creating trust among our customers and achieving long-term added value for all stakeholders.

APPLICATION OF NATIONAL AND INTERNATIONAL FRAMEWORKS BinckBank takes the guidelines formulated by the Dutch Banking Association (NVB) as the starting point for its corporate social responsibility. These guidelines, based in part on the OECD guidelines, are tied into the ‘Future-oriented banking’ package, which also includes principles of the Banking Code and the Social Charter of the banking sector. Within BinckBank, these guidelines are interpreted and applied in accordance with our business ideals. A bank’s social status involves important issues concerning the interests of customers in the context of the duty of care, risk management, governance, and remuneration. In addition to the aforementioned principles, BinckBank also endorses the principles of the Corporate Governance Code and adheres to the principles of a restrained remuneration policy. These elements are explained in detail elsewhere in this annual report.

BinckBank operates in a well-organised environment with a geographical footprint in countries within the European Union. BinckBank is only affected to a limited extent by current and international issues concerning human rights, income equality, working conditions, and the scarcity of resources. The principles referred to above, including (for example) the OECD guidelines, but also the UN Global Compact, the Equator Principles and the Principles for Responsible Investment (PRI), only apply to BinckBank to a limited degree

SCOPE BinckBank breaks down CSR issues into three categories:

1. Customer value and dialogue 2. Business operations 3. Sustainable products and services

Our most important stakeholders are customers, employees, and shareholders, with the regulators, key partners, and suppliers occupying the periphery of our financial ecosystem. Customer care, privacy, and safety are ongoing top priorities for us both in our own business operations and in our Third-Party supplier assessment policy. Requirements are constantly increasing in relation to customer data privacy and ICT systems security, and the GDPR came into force in 2018.

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CUSTOMER VALUE AND DIALOGUE BUSINESS OPERATIONS SUSTAINABLE PRODUCTS & SERVICES

1 Customer satisfaction 6 Risk management 14 Responsible credit policy

2 Financial education 7 Corporate governance 15 Sustainable investment

3 Customer service 8 Tax policy 16 Conservative investment policy

4 Privacy and security 9 Compliance with laws and regulations 17 Transparency on costs and conditions

5 Platform stability 10 Human resources

11 Environmental care

12 Human rights and labour conditions

13 Corruption and bribery

CUSTOMER VALUE AND DIALOGUE 1 CUSTOMER SATISFACTION One of BinckBank’s strategic axes is customer intimacy. Customer satisfaction is the main KPI for this, which is why it is embedded in our annual goals. BinckBank sets out to continuously exceed its customers’ expectations through innovation and knowledge sharing and aspires to be the bank with the highest customer satisfaction rating. BinckBank holds a quarterly survey among different customer groups to measure their level of satisfaction using questionnaires. These insights make it possible to make any necessary adjustments in areas highlighted by customers as having room for improvement. BinckBank also participates in the Banking Confidence Monitor, the annual large-scale survey of the Dutch Banking Association (NVB). As in 2017, BinckBank’s customers notably indicate that they have less confidence in the sector than average, but more confidence in BinckBank.

2 FINANCIAL EDUCATION BinckBank looks to help its customers make better decisions in order to achieve their financial aspirations. Financial education remains one of BinckBank’s key focus areas. BinckBank offers its customers education products such as the Binck Investors’ Day, online seminars, online training modules, and master classes. In 2018, the Academy’s webinars reached more than 25,000 participants in the Netherlands. Customers in Italy and France are reached through the periodical BinckTV, where inspiration and education go hand in hand.

3 CUSTOMER SERVICE Ever since its inception, a top quality customer service has been one of the aspects on which BinckBank stands out from its competitors. The customer services department plays an important role in this respect. To guarantee that quality, BinckBank continuously invests in on-the-job training and coaching. And that is one of the reasons why in 2018, BinckBank again won first prize for best customer service in the online brokerage category in France.

4 PRIVACY AND SECURITY Privacy and online security are intrinsic aspects of BinckBank’s service. BinckBank has devoted a great deal of attention to the General Data Protection Regulation (‘GDPR’), which came into force in 2018. In 2018, there was a sharp increase across the entire industry in phishing and spearphishing attacks, ransomware, data breaches, and other forms of cybercrime, and BinckBank took further steps towards identifying and mitigating these risks. With the improvements made in protection, detection, and response measures, BinckBank is now able to prevent or detect as many attacks as possible and respond to them adequately. Internet security is rightly gaining more and more public attention, also regarding measures taken by consumers themselves to protect their computers and smartphones.

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5 PLATFORM STABILITY BinckBank invests continuously in the stability of the various trading platforms. In 2018, BinckBank’s trading platform proved itself by coping with all peak periods with no significant problems. The system availability during trading hours in 2018 was 99.91%. BinckBank has set up a fully equipped disaster recovery environment for Business Continuity purposes. There is an annual contingency test to check the transition from the production environment to the disaster recovery environment.

BUSINESS OPERATIONS 6 7 8 9 10

Reference is made to the relevant chapters of this report for a description of risk management, corporate governance, tax policy, and compliance with laws and regulations.

11 ENVIRONMENTAL CARE As BinckBank is not involved in corporate financing, it can exercise limited influence over related environmental aspects. BinckBank therefore has no formal environment and climate policy. But it advocates sustainable investment and is a member of the VBDO (Association of Investors for Sustainable Development). We also offer customers as much information as possible about sustainable investment on our websites, particularly about investing in funds.

BinckBank’s ecological footprint is limited to its head office in Amsterdam and branches in Belgium, France, Italy, and Spain. Where possible, BinckBank tries to achieve energy savings both in its own branches and in the services it purchases from third parties.

12 HUMAN RIGHTS AND LABOUR CONDITIONS BinckBank’s geographical footprint is limited to its head office in Amsterdam and branches in Belgium, France, Italy, and Spain. There are no special circumstances concerning human rights and labour conditions in these locations.

13 CORRUPTION AND BRIBERY BinckBank has set up internal procedures to prevent corruption and bribery. Our staff must exhibit complete integrity with respect to positions of power and always act within the limits of the law. All forms of corruption and bribery are strictly forbidden. The Governance, Risk & Compliance (GRC) department monitors the correct adherence to these procedures. In the past year, the bank has had no instances of corruption or bribery.

SUSTAINABLE PRODUCTS & SERVICES 14 RESPONSIBLE CREDIT POLICY BinckBank only offers collateralised loans and mortgages on financing Dutch residential mortgages. Collateralised loans are revolving credit on collateral of securities that can only be used for the purchase of securities. Customers can opt for a separate contract to make use of this credit facility. BinckBank has capped advance rates to prevent overlending among its customers. BinckBank’s willingness to issue credit depends on the customer’s investment portfolio, and adapts to price changes and movements in the portfolio. By setting an upper limit, frameworks are introduced to prevent customers from ending up in a negative equity situation at BinckBank. Collateralised loans are continuously monitored and the customer is contacted immediately if a shortfall occurs to find a solution in consultation with the customer.

BinckBank also actively invests in the financing of Dutch residential mortgage loans. Credit risk acceptance and management has been outsourced to third parties and is monitored based on the comprehensive data on the mortgage portfolio, issued in accordance with the prevailing statutory requirements. BinckBank has issued responsible acceptance criteria.

15 SUSTAINABLE INVESTMENT Within its investment policy for Binck Select, BinckBank applies exclusion criteria to companies that do not satisfy the UN Global Compact guidelines. In a collaborative effort with Sustainalytics, Binck Select screens the totality of shares in which the model invests each quarter. The purpose of this screening is to avoid Binck Select investing in companies that fail to act in keeping with the principles of the UN Global Compact. BinckBank was the first bank to add the Morningstar Sustainability Rating to investment funds and ETFs with Binck Fundcoach. This sustainability indicator is one of the tools that BinckBank uses to help its customers select sustainable investments. Annually BinckBank conducts a surveys under customers as to the sentiment regarding ‘sustainable investment’. The number of private investors who invest sustainably has continued to grow in the past two years and almost half of all investors now also own sustainable funds or shares.

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16 CONSERVATIVE INVESTMENT POLICY BinckBank pursues a conservative financial policy and takes a cautious approach to investing the funds entrusted to it by customers. Funds entrusted, which are not used for securities-based loans, are partly held in cash with the remainder being invested through the investment portfolio (consisting of bonds and Dutch residential mortgage loans). Lending is conducted in a responsible manner in accordance with the established risk appetite.

17 TRANSPARANCY ON COSTS AND CONDITIONS BinckBank strives for transparency in the pricing model for its customers so they can determine in advance what BinckBank’s services cost and verify afterwards what they have paid for them. In the spring of 2018, BinckBank introduced new investment packages and associated fees for its ‘Zelf Beleggen’ customers in the Netherlands. The reasoning behind this is the more investment activity, the more favourable the rates, and the larger the range of services provided.

One of BinckBank’s priorities is for its customers to properly understand how its product costs are structured and that the explicit transaction costs are just one element of this structure, alongside the interest rate and the spread. One example is that BinckBank investors have been able to profit from lending out their securities. Securities lending for a fee is not new in itself, but BinckBank is allowing its customers to share in the proceeds from this lending activity. This is not always evident in communication supplied by other market participants. BinckBank will only lend on securities after receiving the customer’s express consent. After deducting administrative expenses, the proceeds are divided equally between BinckBank and the customer.

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TAX POLICY

INTRODUCTION BinckBank has a good relationship with the Dutch Tax and Customs Administration and regards compliance with its tax obligations as a key aspect of its social responsibility. Transparency and trust are key elements in the current social discussion on CSR. BinckBank concurs with this discussion and thus explains its tax policy in this part of the report.

The income tax paid by BinckBank for each geographic segment is demonstrated by means of the country-by-country overview in the Corporation Tax section.

TAX POLICY BinckBank’s customers are primarily looking for a secure and reliable bank. BinckBank’s positioning as a provider of financial services is therefore geared towards a low risk appetite in its policy and operational decisions relating to tax affairs. BinckBank aims to avoid any risks by avoiding tax stances that could adversely affect the tax position or reputation of BinckBank and/or its customers.

BinckBank strives to comply with all relevant national and international tax rules and legislation, taking account of the intention of the legislature and best-practice guidelines, such as the OECD Guidelines for Multinational Enterprises, in order to adequately monitor the tax position and pay taxes on time. BinckBank is assisted by accredited tax consultants in all countries where it operates. It is BinckBank’s view that a reasonable application of the law does not involve aiming for an artificial reduction of the effective tax burden, for instance by means of tax avoidance through tax havens. BinckBank also has a responsibility towards her shareholders to improve shareholder value, bearing in mind that taxation is a derivative of business operations. If BinckBank believes that it can take advantage of a tax facility, this will usually be agreed in advance with the Dutch Tax and Customs Administration. BinckBank’s tax position is in keeping with its business operations and reflects its business strategy and the geographic distribution of its activities. BinckBank is familiar with the OECD’s definitive action reports on the ‘Action Plan on Base Erosion and Profit Shifting’ (BEPS) project and the similar EU Anti-Tax Avoidance (ATA) programme, with the introduction of the Anti-Tax Avoidance Directive (ATAD1). Given that BinckBank’s tax position is in keeping with its business operations in various countries and it does not use any aggressive and socially criticised tax structures and tax havens, BinckBank believes that the BEPS action report and the ATA programme will have a limited impact on it.

For the purpose of transfer pricing (the pricing of international transactions within a multinational company), BinckBank uses the Master/Local File principles, which have been coordinated with the Dutch Tax and Customs Administration by means of a bilateral Advance Pricing Agreement (APA) and unilateral APA. An agreement has been reached in which the Transactional Net Margin Method (TNMM) is used to calculate transfer pricing, with gross operating revenue as the profit indicator. The profit margin of the foreign branch is established as a fixed percentage of the ‘net fee and commission income’ and all other income and expenses are borne by the head office in the Netherlands. For branch offices that do not generate local income, it has been agreed with the Dutch Tax and Customs Administration under the unilateral APA that the cost-plus basis is the most suitable method for transfer pricing.

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BinckBank practises transparency towards the tax authorities in all countries where it operates. This means that BinckBank provides all relevant and requested information on tax affairs in order to facilitate a reasonable assessment of its tax position. If necessary, and where practical, discussion items are agreed as far as possible in advance with the relevant tax authority. This limits the possibility of subsequent differences in opinion and any later adjustments. Ultimately, this gives BinckBank more clarity and certainty about tax positions. In the context of horizontal monitoring, BinckBank has entered into a cooperation agreement in the Netherlands with the Dutch Tax and Customs Administration. The Dutch Tax and Customs Administration wishes to use horizontal monitoring to place even greater emphasis on cooperation between equals in monitoring. This means that when a need arises for coordination between BinckBank and the Dutch Tax and Customs Administration, this happens beforehand instead of having subsequent audits. When the Dutch Tax and Customs Administration enters into this type of agreement, it does so on the basis of transparency, understanding, and mutual trust. For us as the taxpayer, that means that attention to monitoring of tax issues is critical. BinckBank is well aware of this and acts accordingly. In 2018, BinckBank held various meetings with tax inspectors and account managers from various tax areas to strengthen the understanding of BinckBank’s client profile and explain the tax function and strategy, internal tax control, and audit systems in more detail.

TAXATION AND CUSTOMERS BinckBank provides investment services to many customers in various countries who are subject to different local tax systems. In its role as broker, BinckBank assumes an active role in withholding and paying certain taxes. BinckBank has set up adequate processes in this role for prompt and correct payments to be made in the various countries. First and foremost the customers are responsible for their own tax obligations. BinckBank plays a facilitating role and does not provide any tax advice to its customers.

BinckBank is obliged to forward certain information about savings and securities products to the Dutch Tax and Customs Administration. This information is used for purposes such as pre-completing the income tax returns of Dutch taxpayers, which makes it easier to file them. In 2018, BinckBank voluntarily participated in a quality survey of INLG information reporting (annuity savings scheme) by the Dutch Tax and Customs Administration, which concluded that it is satisfied with the internal processes and controls, both in the IT field and in the manual second line of defence controls. The Dutch Tax and Customs Administration found that BinckBank meets the standard and indicated that the information provided on its Binck Pension product was of a high quality.

The information is also used to counteract tax evasion (in the form of undeclared savings, for example), as in the context of the Common Reporting Standard (CRS). Under the CRS, BinckBank must establish whether customers are tax residents of countries other than the Netherlands. Together with the account information, the Dutch Tax and Customs Administration shares this information with the tax authorities of participating countries. Conversely, the Dutch Tax and Customs Administration receives information from participating countries about residents of the Netherlands who hold bank and/or securities accounts in those countries.

CORPORATE TAX The tax burden shown in the financial statements relates only to current tax. The effective tax burden is the reported tax expense as a percentage of the pre-tax result. The differences between accounting and tax rules give rise to an effective tax burden that differs from the nominal tax rate. On a consolidated basis, BinckBank’s effective tax burden in 2018 was 1.1% of the operating result (2017: -3.3%) which is lower than the nominal tax rate. The reconciliation of the effective tax rate with the tax rate applicable to the consolidated financial statements is set out below. 2018 2018 2017 2017 (amounts in € 000’s) amount percentage amount percentage

Nominal tax rate 8,966 25.0% 2,062 25.0%

Effect of different (foreign) tax rate 137 0.4% 66 0.8%

Effect of substantial holding exemptions (2,109) -5.9% (216) -2.6%

Effect of tax facilities (118) -0.3% (2,256) -27.4%

Other effects (6,476) -18.1% 70 0.9%

Total tax effect 400 1.1% (274) -3.3%

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The lower tax burden in relation to the nominal tax rate can be explained as follows:

• Participation exemptions ensure there is no double taxation of holding results. In 2018, this item is affected to the extent of € 2.0 million by the profit made on the sale of Think ETF Asset Management B.V. • The reduction of the corporation tax rate upon the deferred taxes resulted in a benefit of € 6.3 million which is recognised in the other effects. The new rates are based on the 2019 tax plan, in which the corporation tax rate gradually decreases from 25% in 2019 to 20.5% in 2021. • The effect of the tax facilities includes the benefits derived from the settlement reached between BinckBank and the Dutch Tax and Customs Administration on the application of the Innovation Box. Additionally, the tax facilities include a liquidation loss from the cumulative losses in the participation TOM Holding N.V., which on liquidation was deducted from BinckBank N.V.’s taxable profit. • Other tax effects that can cause differences are adjustments in respect of prior financial years, and expenses that are not tax deductible, such as the shares issued to personnel under the remuneration policy.

COUNTRY-BY-COUNTRY REPORTING OVERVIEW 2018

(amounts in € 000’s) Most important Operating result Corporate Tax Jurisdiction company Activity FTE before tax tax burden online broker, Netherlands BinckBank N.V. asset management, 436 34,912 26 0.1% subsidiaries online broker, Belgium Binck Belgium branch 40 479 192 40.1% asset management online broker, France Binck France branch 38 257 109 42.4% asset management

Italy Binck Italy branch online broker 24 142 48 33.8%

Spain Binck Spain branch sales office 5 72 25 35.2%

Total 543 35,862 400 1.1%

At 0.1% the effective tax burden in the Netherlands is lower than the nominal rate of 25%, mainly because of the reduced corporation tax rate used in the valuation of the deferred taxes and the profits realised on participating interests that fall under the participation exemption. Additionally, the non-deductible costs and differences between tax and accounting depreciation periods for assets affect the rate.

The effective tax rate for BinckBank Belgium is 40.1%, while the nominal tax rate is 29.58%. The higher effective tax burden is largely due to a retroactive settlement of the notional interest rate deduction under the Belgian tax system.

The effective tax rate for BinckBank France is 42.4%, while the nominal tax rate is 28%. This is due to a retroactive settlement of previous years relating to transfer pricing.

The effective tax rate for BinckBank Italy is 33.8%. Corporation tax in Italy consists of two components, each with a different basis, the IRES and the regional IRAP. The IRES is a tax on taxable profit and amounts to 27.5%. The IRAP is a regional tax which is not charged on taxable profit but on production activities, and amounts to 5.57%.

The effective tax rate for BinckBank Spain is 35.2%, which is in line with the nominal tax rate of 30%.

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TAX DEVELOPMENTS As a member of the financial sector, BinckBank is regularly confronted with the impact of new tax legislation.

In Belgium a tax was implemented in 2018 on the value of the assets held in securities accounts by private individuals. This new tax has become known as the ‘securities tax’ (effectentaks). BinckBank had to set up internal processes and systems in 2018 to be able to conduct withholding of this tax and subsequent payment to the Belgian Tax and Customs Administration. Private individuals with an asset value below the threshold can also opt-in for BinckBank to withhold and pay the tax on their behalf.

At the same time, the Belgian stock exchange transactions tax, the tax that investors pay on purchases and sales of shares or bonds, was raised again in 2018. The tax on shares rose from 0.27 to 0.35%, and the tax on bonds from 0.09 to 0.12%.

Meanwhile, in many other countries we see that corporation tax rates are being lowered (in phases) with the aim of improving the investment climate for foreign businesses. Besides the Netherlands, Belgium, Italy, and France have also implemented tax reductions.

Various legislative initiatives at national and European level have also started, such as the aforementioned BEPS action reports, ATA programme, and CRS. The EU is also working on the introduction of a common profit tax base: the Common Consolidated Corporate Tax Base (CCCTB). These initiatives have arisen from the growing attention paid to the taxation of multinationals.

In February 2013 the European Commission made new proposals for introducing a tax on financial transactions, the Financial Transaction Tax (FTT). Ten Member States have joined forces to give shape to the FTT. The idea behind this tax is for the financial sector to give money back to society following the 2008 financial crisis. This tax would also impose restrictions on high-frequency trading. By the end of 2018, an agreement on the introduction of the FTT had still not been reached. The scope and date of the introduction of the FTT depend on negotiations between the participating States, the European Council, consultations with other EU institutions, and the subsequent transposition into local legislation. In 2018, the Spanish government published a legislative bill for the introduction of an FTT at national level.

49 CORPORATE GOVERNANCE CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

BinckBank is a listed public limited company under Dutch law. The Executive Board is responsible for managing the company. The Supervisory Board is tasked with overseeing the policy of the Executive Board and general developments at the company and its affiliate. The Supervisory Board advises the Executive Board in the exercise of its duties. The executive and Supervisory Boards are directly accountable to the company’s General Meeting. BinckBank’s executive and Supervisory Boards are jointly responsible for the bank’s corporate governance structure. Good corporate governance is a precondition for the efficient and effective realisation of set goals, ensures adequate control of risks and that informed judgements can be made regarding the interests of all of BinckBank’s stakeholders, such as shareholders, employees, and customers. Within this framework, BinckBank applies the principles of both ‘Future-oriented banking’ and the Dutch Corporate Governance Code.

A comprehensive overview of the application of the Corporate Governance Code is also published at www.binck.com.

Future-oriented banking

At the end of 2014, the Dutch Banking Association (NVB) presented the package entitled ‘Future-oriented banking’, in which banks jointly set out their intention to pursue service-oriented and sustainable banking activities. The package consists of the Social Charter, the Banking Code, and rules of conduct.

SOCIAL CHARTER Society must be able to rely on a stable, service-oriented, and reliable banking industry that offers products and services in line with the often widely divergent wishes of consumers, businesses, institutions, and governments. This attaches requirements to the competencies of banks to realise promises and expectations. It is necessary to create market conditions that ensure healthy competition based on a varied banking landscape and provide a sufficiently diversified offer, for example, in terms of the type of activities and services, forms of undertakings, and geographical range. In a shared struggle for a stable, service-oriented, and reliable banking industry, the Social Charter is based on the following assumptions:

• the banking industry is pluriform and offers customers a wide choice • banks are reliable, service-oriented, and transparent • bank employees are ethical, expert, and professional, and ensure that customers and other stakeholders are treated with care • banks have a social responsibility to contribute to a sustainable economy.

BANKING CODE The Banking Code applies to all activities performed in or directed towards the Netherlands by banks established in the Netherlands and licensed by De Nederlandsche Bank under Article 2:11 of the Financial Supervision Act. If there is overlap or contradiction with international legislation or the policy of regulators, this prevails over self-regulation such as the Banking Code. The Banking Code is designed – along with the Social Charter, the bankers’ oath, rules of conduct, and disciplinary scheme – to make a major contribution towards public trust in banks and their role in the community. Consequently, the principles in the Banking Code emphasise the importance of sound and ethical operations by banks and set this out in the principles for the Executive Board and Supervisory Board, proper risk management, thorough audit processes, and a sound, balanced, and sustainable remuneration policy. Compliance with the Banking Code is monitored by an independent Banking Code Monitoring Committee.

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The main task of the Banking Code Monitoring Committee is to monitor compliance with the Banking Code based on the ‘comply or explain’ principle. In doing so, the committee can identify any ambiguities and imbalances in the Banking Code, and make recommendations about possible adjustments. The Monitoring Committee will in any case issue a publicly available annual report. The Banking Code does not stand alone but is part of the full set of national and international regulations, case law, and self-regulation. When applying its principles, a bank will take this national and international context, the social environment in which it operates, and the specific characteristics of the individual bank and group, if it is part of one, into account. The principles in the Banking Code pertain to: (i) sound and ethical operations, (ii) the functioning of the Supervisory Board, (iii) the functioning of the Executive Board, (iv) the risk policy, (v) the audit function, and (vi) the remuneration policy.

RULES OF CONDUCT In conjunction with the introduction of the Social Charter and updating the Banking Code, the bankers’ oath has also been implemented for all employees working in the Netherlands. Everyone working in the banking industry is bound by the rules of conduct attached to this statement for the ethical and careful performance of their position. Employees are personally responsible for complying with those rules of conduct and can be held accountable for non-compliance and, if necessary, face disciplinary action. New employees must take the oath within three months of their appointment. Employees who have taken the oath automatically endorse the code of conduct for bank employees and must comply with disciplinary rules.

The disciplinary rules apply to individual employees. Anyone discovering an infringement of the code of conduct may file a complaint with the Foundation for Banking Ethics Enforcement (Stichting Tuchtrecht Banken). This Foundation checks the content of the complaint against the Disciplinary Regulation for the Banking Sector. When conducting disciplinary proceedings, the Foundation receives support from the independent institute DSI, whose activities since 1999 include screening employees in the financial sector, keeping registers of recognised financial experts, and settling between financial companies concerning financial investment.

Dutch Corporate Governance Code

The Dutch Corporate Governance Code is an important code for good corporate governance in Dutch listed companies. It is self-regulatory in nature, and is based on the principle known as ‘comply or explain’. The duty of the Corporate Governance Code Monitoring Committee is to encourage the topicality and usefulness of the Corporate Governance Code, and to monitor compliance with The Code by Dutch listed companies.

The Corporate Governance Code sets out principles and best practice provisions that regulate the relationships between the Executive Board, the Supervisory Board, and the general meeting. The principles can be understood as broadly supported general perceptions of good corporate governance. The principles are expressed in concrete best practice provisions.

On 7 September 2017, with the publication of the designation order in the Bulletin of Acts and Decrees, the Corporate Governance Code as revised in 2016 became law, effective from 1 January 2018.

The broad outlines of the company’s corporate governance must be explained each year in a separate section of the management report, partly by reference to the principles of the Corporate Governance Code. This section must also expressly state the extent to which the best practice provisions in the Corporate Governance Code are being observed, and where this is not the case, why and to what extent the provisions are not applied. This ‘comply or explain’ principle has a basis in the law. When a company deviates from the best practice provisions then it must explain the nature of and the reasons for the deviation. If the deviation is temporary and lasts longer than one financial year, the explanation must indicate when the company intends to comply with the best practice again. As required, a description must be provided of the alternative measure implemented and an explanation of how that measure will achieve the objective of the best practice, or a clarification of how the measure contributes towards a good corporate governance structure of the company.

The provisions of this chapter and the statements on the key features of the company’s management and control systems in relation to financial reporting, as included in the management statement, can also be described as the corporate governance statement mentioned in Article 2:391, paragraph 5 of the Dutch Civil Code.

52 CORPORATE GOVERNANCE

Legal structure

BinckBank is a public limited company listed on Euronext (Amsterdam) with branches in Belgium, France, Italy, and Spain. It adopted a two-tier board structure in 2012.

II III 50

BinckBank

Beaabeif BinckBank B

BinckBank BinckBank BinckBank BinckBank Belgi Bance ance Bance ain Bance Italy Bance

As at December 0

Shares, issue of shares, voting rights, and shareholder structure

SHARES The company’s authorised capital amounts to € 10,000,005, divided into 100,000,000 ordinary shares and 50 priority shares each with a nominal value of € 0.10. BinckBank’s issued capital consists of 67,500,000 ordinary, listed shares and 50 priority shares. The priority shares represent 0.00007% of the issued capital, are unlisted registered shares, and are held by Stichting Prioriteit Binck (‘the Foundation’). The priority shares confer special control rights, as stipulated in the company’s articles of association. The company’s articles of association are available on our website www.binck.com. Further details regarding the position of the Foundation are provided below in this section. No depositary receipts are issued for BinckBank shares.

ISSUE OF SHARES The general meeting adopts resolutions for the issue of shares and may delegate this authority to another corporate body for up to five years. Upon the issue of ordinary shares, each shareholder has a preference right in proportion to the total amount of their shares, subject to legal provisions. No preferential rights exist on shares issued: a) to employees of the company or a group company; or b) against payment other than in cash.

Preferential rights may be limited or excluded by a general meeting resolution. Preferential rights may also be limited or excluded by the aforementioned other company bodies if these have been granted the authority to limit or exclude the preferential rights by a general meeting resolution for a period of up to five years. A general meeting resolution to limit or exclude preferential rights or to grant or withdraw the authority to take such action requires a majority of at least two- thirds of the votes cast if less than half of the issued capital is represented at the general meeting. Such resolutions may be adopted by the general meeting only if proposed by the Foundation. Executive Board resolutions for the issue of shares are subject to approval by the Supervisory Board.

53 CORPORATE GOVERNANCE

VOTING RIGHTS Each BinckBank share entitles its holder to cast one vote. Resolutions are adopted by an ordinary majority of the votes cast, unless a larger majority is required by law or the articles of association. BinckBank uses a registration date in accordance with the Shareholders’ Rights Act.

SHAREHOLDER STRUCTURE Page 19 of this report of the Executive Board includes a list of the shareholders who have disclosed their interest in BinckBank under Chapter 5.3 of the Financial Supervision Act. No shareholder agreements have been concluded between BinckBank and the major shareholders concerned.

Anti-takeover defences

The Foundation has a role in many important resolutions under the articles of association. The Foundation holds 50 BinckBank priority shares. The Foundation is authorised to initiate specific general meeting resolutions and grant prior approval for certain resolutions described in the articles of association. The Foundation also has direct powers, including setting the number of executive and supervisory directors. In short, the objective of the Foundation is to shield BinckBank’s management and course of business from influences that might adversely affect the independence of the company and its affiliate, and to promote a positive course of events in said management.

The board of the Foundation has three members. Member A is appointed by the Supervisory Board of BinckBank, member B is appointed by the Executive Board of BinckBank and member C is appointed by members A and B together. Mr J.W.T. van der Steen (Supervisory Board chairman), Mr V.J.J. Germyns (Executive Board chairman), and Ms C. van der Weerdt-Norder (supervisory director) currently act as the Foundation’s A, B, and C board members.

With due observance of its objects under the articles of association, the Foundation is obliged when exercising its powers to protect the interests of the company and its affiliate, and in doing so to consider the legitimate interests of those involved in the company. The manner in which the Foundation exercises its powers will depend on the actual facts and circumstances of the individual case.

Executive Board

BinckBank has a two-tier board system, meaning that management and supervision are assigned to the BinckBank Executive Board and Supervisory Board respectively. BinckBank believes that this structure promotes a system of adequate checks and balances, in which the Executive Board is responsible for the day-to-day management of the company and the realisation of the company’s short-term and medium-term targets, while the Supervisory Board oversees the Executive Board and has a advisory role.

DUTY OF THE EXECUTIVE BOARD Subject to the limitations stated in the articles of association, the Executive Board is tasked with the management of the company. The Executive Board is responsible for the continuity of the company and its affiliate. The Executive Board focuses on the long-term value creation of the company and its affiliate, taking the interests of stakeholders into consideration.

REGULATIONS FOR THE APPOINTMENT, SUSPENSION, AND DISMISSAL OF EXECUTIVE DIRECTORS BinckBank’s executive directors are appointed by the Supervisory Board, in accordance with the provisions of the articles of association, based on a non-binding nomination by the Foundation. An executive director is appointed or reappointed for a term commencing on the date of their appointment/reappointment and ending at the end of the general meeting held in the fourth calendar year after the calendar year in which they were appointed/reappointed, or at such earlier time as is determined at the time of their appointment/reappointment. Executive directors may be suspended or dismissed by the Supervisory Board at any time. The Supervisory Board may not dismiss a member of the Executive Board without taking advice from the general meeting on the dismissal.

54 CORPORATE GOVERNANCE

CONTINUOUS PROFESSIONAL DEVELOPMENT BinckBank has a continuous professional development (CPD) programme for its executive directors. The CPD programme consists of attending training programmes and courses intended to maintain and, where necessary, improve the level of expertise of executive directors. As Evert-Jan Kooistra is a registered accountant, he falls under the CPD scheme of the Netherlands Institute of Chartered Accountants (NBA). Evert-Jan Kooistra fulfilled his CPD obligations in 2018. In 2018, Vincent Germyns attended the five day study trip ‘Customers the Day After Tomorrow Tour – Silicon Valley’ organised by Nexxworks. Evert-Jan Kooistra has followed the five-day program ‘Innovation Bootcamp’ at Nexxworks. Steven Clausing has followed a five-day study trip ‘Digital transformation’ via Wortell.

TASK OF THE SUPERVISORY BOARD The Supervisory Board is tasked with overseeing the policy of the Executive Board and the general developments of the company and its affiliate. The Supervisory Board values close involvement in the company’s development. In fulfilling its duties, the Supervisory Board focuses on the long-term value creation of the company and its affiliate, taking the interests of those involved in the company into consideration. It also considers the social aspects of doing business that are relevant to the company. The Supervisory Board also advises the Executive Board. The Supervisory Board is further tasked with all duties assigned to it by law and under the articles of association. Certain key resolutions are subject to the approval of the Supervisory Board.

Other than under the provision of Article 21 sub 7 of the articles of association, supervisory directors of BinckBank are appointed by the general meeting on the basis of nomination by the Supervisory Board. The general meeting and works council may recommend candidates to the Supervisory Board for nomination as a supervisory director. For one-third of the number of supervisory directors, the Supervisory Board will nominate a person recommended by the works council, unless the Supervisory Board objects to the recommendation on the grounds that it does not consider the recommended candidate to be suitable to act as a supervisory director, or that the composition of the Supervisory Board would not be appropriate if the recommendation were to be adopted. A supervisory director may be suspended by the Supervisory Board. The Netherlands Enterprise Court at the Amsterdam Court of Appeal may dismiss a supervisory director on the conditions specified in the articles of association. The general meeting can withdraw its confidence in the Supervisory Board. A resolution of no confidence by the general meeting will result in the immediate dismissal of all Supervisory Board members.

A supervisory director is appointed or reappointed for a term commencing on the date of their appointment/reappointment and ending at the end of the annual general meeting held in the fourth calendar year after the calendar year in which they were appointed/reappointed, or at such earlier time as determined at the time of their appointment/reappointment.

General Meeting

The general meeting has the powers vested in it by law and under the articles of association. The Foundation has an important role with reference to the powers of the general meeting in many cases. A general meeting is held at least once a year. The most important powers of the general meeting concern the adoption of the financial statements, the establishment of dividends and other distributions, the granting of discharge from liability to the Executive Board for the policy pursued and to the Supervisory Board for supervision conducted, the setting of the remuneration policy of the Executive Board and the remuneration of the Supervisory Board, amendments to the articles of association, and all the other powers vested in it by law and the company’s articles of association.

55 CORPORATE GOVERNANCE

Compliance with the Corporate Governance Code

BinckBank follows the best practice provisions set out in the Corporate Governance Code, with the exception of the best practice provisions indicated below.

REMUNERATION OF EXECUTIVE BOARD Under best practice provisions 3.4 and 3.4.1 of the Corporate Governance Code, the Supervisory Board must account for the implementation of the remuneration policy in a transparent manner. BinckBank applies best practice provisions 3.1 and 3.4.1 of the Corporate Governance Code, if and to the extent that publication does not concern commercially sensitive information, in other words, financial and commercial targets. The executive and Supervisory Boards of BinckBank take the view that providing such information is not in the interests of the company and its stakeholders. The same applies to the main elements of the contract between an executive director and the company, which according to best practice provision 3.4.2 of the Corporate Governance Code should be published without delay after the contract is concluded, to the extent that these elements at least contain market-sensitive information. Specific information mentioned in the applicable remuneration policy is moreover published afterwards. In this way the Supervisory Board reports to the general meeting on the assessment of the functioning of the Management Board.

According to best practice provision 3.1.2 of the Corporate Governance Code, shares awarded to executive directors without financial consideration must be retained for a period of at least five years. BinckBank complies with best practice provision 3.1.2 of the Corporate Governance Code in the sense that BinckBank shares must only be held for a period of two years (instead of five years) after they have been unconditionally awarded. With this shorter retention period of two years instead of five years, BinckBank complies with the variable remuneration rules as set out in the Restrained Remuneration Policy Regulation in the Financial Supervision Act 2017. In BinckBank’s opinion, the conditional allocation of a material part of variable remuneration (as stated in the annex, part A, Restrained Remuneration Policy Regulation in the Financial Supervision Act 2017) combined with the stated retention period of two years is sufficient to meet the objective of a long-term commitment to the company and its affiliate.

BALANCED COMPOSITION OF EXECUTIVE BOARD AND SUPERVISORY BOARD An executive or Supervisory Board of a large company has a balanced composition if at least 30% of the members are female and at least 30% are male. As the Supervisory Board is made up of 50% female supervisory directors, its composition can be considered balanced. But the seats on BinckBank’s Executive Board are not evenly balanced. Efforts will of course be made to achieve a more balanced composition when filling any vacancies that arise for executive directors.

56 CORPORATE GOVERNANCE

DECREE IMPLEMENTING ARTICLE 10 OF THE TAKEOVER DIRECTIVE

Under Article 10 of the Takeover Directive, BinckBank is obliged to include the following information in its annual report: a. An overview of the company’s capital structure is included on pages 53 and 54 of this annual report. This explains the various types of shares and the rights attached thereto (including special control rights), the obligations, and the percentage of issued capital represented by each type of share; b. The company has not imposed any restrictions on the transfer of shares; c. Shareholdings in the company which have to be reported pursuant to Section 5.3 Wft are listed on page 19 of this annual report; d. Special control rights attached to shares held by the Foundation are stated on pages 53 and 54 of the annual report; e. Control of the scheme whereby rights are allocated to employees to take or receive shares in the capital of the company or a subsidiary company is performed by the internal audit department (IAD) and the compliance department; f. No restrictions apply to the voting rights attached to the company’s shares. No share certificates are issued; g. The company is only aware of a restriction regarding the transfer of BinckBank shares that arises as a result of the remuneration policy in force and similar restrictions applying to other employees of BinckBank; h. The procedures for appointing and dismissing supervisory and executive directors and the regulations applying to amendments to the articles of association are established in the company’s articles of association and are described in general terms on page 55 of the annual report. For the full text of the articles of association, see www.binck.com; i. The powers of the Executive Board with particular reference to the issuance of the company’s shares and the repurchase of shares by the company are described on pages 53 and 54 of the annual report. For further information, see the company’s articles of association and the minutes of the general meeting at www.binck.com; j. Information on severance arrangements with executive directors (insofar as applicable) is provided in the Remuneration Report for 2018.

Conclusion: BinckBank complies with virtually all the provisions of the Corporate Governance Code and the Banking Code. Any irregularities have been explained and substantiated.

57 RISK MANAGEMENT RISK MANAGEMENT

RISK MANAGEMENT

BinckBank’s approach to risk management is in keeping with its core activities and scale. BinckBank consciously operates a conservative risk profile in order to mitigate the impact of unexpected events on its solvency, liquidity, results, and reputation as much as possible. Policies, a risk management framework that is continuously improved, and support systems are devoted to anticipating risks and prevent or limiting them wherever possible. Clear choices and the adequate embedding of risk management at every level of the organisation play an important role in this respect.

Risk governance

Efficient and effective risk management is vital for BinckBank in pursuing its strategy. The risk management framework with the accompanying policies and systems are continuously improved and adapted to changes in the external setting and the internal organisation. Operational control measures have been described in detail and the effectiveness of these measures is assessed periodically.

GOVERNANCE STRUCTURE & THREE LINES OF DEFENCE BinckBank operates according to the Three Lines of Defence principle (3LoD). In this model, line management (the business) is responsible for the organisation and (risk) control of its own processes. The business is supported by the second-line function, which defines the frameworks, provides advice, and monitors whether the business is actually taking its responsibilities. The third line (the internal audit function) independently evaluates the performance of the first and second lines.

The Supervisory Board is responsible for oversight of the Executive Board, and is advised in this by the audit committee, the risk and product development committee, and the remuneration committee.

The Executive Board is ultimately responsible for risk management within the bank. It is supported in this by risk committees, with representatives of the first and second lines in each risk committee. The third line does not have fixed representation on the risk committees but may always take part in deliberations. BinckBank has an integrated Risk & Control Framework, which is actively tested and monitored for its effectiveness and efficiency. The outcome of this is reported periodically to the various risk committees to support decision-making on risk management.

The Executive Board conducts an annual inventory of the main risks and, where necessary, formulates measures to bring the consequences into line with the risk appetite. The Executive Board forms an opinion on the realisation of the strategic objectives and the risk management, and can draw on a number of resources to do this, including monthly and quarterly business reporting, second-line risk reporting, self-assessments of the risk committees, and internal audit reports. For more information about risk governance, see the Risk Management chapter of the financial statements, under explanatory note 41.

Risk appetite

Risk appetite involves a balance between risk and return and is a core element of BinckBank’s business operations. Each year we evaluate our risk appetite, which we then document in a risk appetite statement with both qualitative and quantitative elements. The statement is drafted by the Executive Board and subject to the approval of the Supervisory Board.

59 RISK MANAGEMENT

The most important principles on which we base our risk appetite and which create the solid framework within which we operate are:

• BinckBank operates in a balanced manner in the interest of the customers and other stakeholders of the bank • BinckBank operates in observance of high moral, ethical, and prudential standards • BinckBank does not take any risks with the funds entrusted that could jeopardise the trust in us • BinckBank operates in a compliant manner within the boundaries of laws and regulations • BinckBank strives for transparency in all tax-related matters • BinckBank publishes the information given to its stakeholders in a consistent and transparent manner • BinckBank offers a safe and healthy work environment. Employees are treated with dignity and respect • BinckBank avoids practices that could damage its reputation • BinckBank promotes a healthy risk culture at all levels of the organisation, with risks discussed in an open and transparent manner and a conscious, well-informed, and balanced assessment is made of the relevant risks versus the return at all levels of decision-making.

The risk appetite is monitored by means of a risk dashboard. This sets quantitative standards in order to assess whether BinckBank has remained within its own risk appetite. This dashboard includes indicators that reflect BinckBank’s risk profile as accurately as possible. Monthly monitoring in the relevant risk committees makes it possible to make timely adjustments and keep the current risk profile within accepted risk appetite parameters.

BinckBank operates in a dynamic and complex environment. BinckBank conducts its business on the basis of an appropriate balance between risk and return, and strives to accept risks in a conscious and responsible way. The business model of banks is essentially based on taking well-considered risks. Although BinckBank strives for a moderate risk profile, there can be times when it is appropriate for various reasons to accept a higher risk, either temporarily or for a longer term.

Risk management and significant developments in 2018

Both the rapidly changing external environment in which BinckBank operates (including persistently low interest rates, rapid technological developments, cybercrime, new legilation and regulations, etc.), as well as internal factors (such as the flexibility and freedom to act that the organisation needs to successfully implement and market the strategic transformation and diversification of the business model) also affected the risk profile of BinckBank and the risk-related subjects that received the bank’s primary attention in 2018.

STRATEGIC AND BUSINESS RISK Strategic risk is defined as exposure to a strategy that proves ineffective, as a result of which the business objectives are not achieved and/or reputational damage is incurred. For BinckBank, the trust of the customer and other stakeholders is essential and BinckBank therefore strives to minimise risks that could damage its reputation as far as possible.

The business risk as a component of the strategic risk manifests itself when it transpires that the earnings model is not sustainable in the longer term due to changing conditions in the competitive field, changes in laws and regulations, changes in the money and capital markets, and technological developments.

Business risk is expressed primarily in structurally falling revenues or rising costs, with diminishing profitability as a result. BinckBank’s business risk is high. It operates in a market with stiff competition, extremely low interest rates, rapid changes in technology, and new and complex legislation and regulations that must always be implemented. Staying commercially competitive requires BinckBank to continually evaluate and adapt its earnings model and operational model to the changing market conditions.

60 RISK MANAGEMENT

BinckBank wants to be less dependent on the volatile income from securities transactions and strives for a healthy balance between operating expenses and income. To achieve this, work in recent years has focused on diversifying the product offering with the aim of spreading the income flow more widely. Successful marketing of new products and services is one of the key areas. The following developments in 2018 have contributed towards this aim:

• Income from brokerage activities: BinckBank introduced a new price plan in the Netherlands. The introduction of an asset-based service fee has had a positive effect on income stability. • Income from asset management activities: the broad asset management proposition, with Binck Comfort and Binck Forward alongside Binck Select, led to assets under management of € 890 million at year-end. The outflow of Binck Select funds has not yet been fully offset by inflows into Binck Forward and Binck Comfort, but with the rebranding of Alex to Binck, BinckBank is positioning itself to achieve growth in net assets from 2019. ‘Binck Vie’, a life insurance product with an investment and asset management component, was also launched in France in the fourth quarter of 2018. BinckBank expects these products to make a sustainable contribution towards the growth of assets under management in the coming years. • Interest income: the mortgage portfolio provides a stable source of interest income.

Additionally, as part of the strategic reorientation in 2015, BinckBank identified a number of non-core activities. After the phasing out of the TOM activities and the sale of Able in 2017, the sale of the 60% holding in Think ETF Asset Management B.V. and the termination of BPO services in 2018 completed the disposal of the non-core activities. From 2019, the entire focus will be on expanding BinckBank’s core activities.

SOLVENCY RISK Solvency risk is the risk that BinckBank cannot meet its internal and external capital requirements. Solvency management is aimed at meeting the capital requirements and ratios at all times, while allowing the strategy to be implemented. This takes into account the requirements of regulators, the interests of our customers, and the interests of shareholders.

BinckBank has a strong capital position, both in terms of the capital ratios and the leverage ratio. The minimum amount of capital to be held is calculated by internally developed models that are prescribed as standard. The available capital at BinckBank exceeds the minimum that must be held in accordance with the models. BinckBank’s minimum capital requirement in this area translates into a capital ratio of 22.2% based on fully phased-in additional capital buffers.

CREDIT AND COUNTERPARTY RISK Credit risk is the risk of a counterparty and/or issuer, involved in the trade or issue of a financial instrument, defaulting on an obligation and thus harming BinckBank financially. Credit risk within BinckBank is broken down into risks on investments and cash, mortgage receivables, collateralised loans, margin, and counterparty risk.

• Credit risk in the investment portfolio is kept to a minimum and all exposure is prudent and in accordance with the established risk appetite. Investment portfolio purchases must have a long-term credit rating of at least single A (Fitch or equivalent). BinckBank limits the credit risk in its own portfolio by aiming for adequate diversification in its investments through limits on each individual investment. • BinckBank mitigates the credit risk of mortgage receivables by monitoring the collateral values of the residential properties and third-party guarantees. A sunbstantial portion of the mortgage portfolio is covered by the National Mortgage Guarantee scheme. • BinckBank further wishes to avoid a situation in which it has an uncovered credit exposure to its customers and thus runs a credit risk in respect of its customers. BinckBank limits the credit risk in respect of its customers by continuously monitoring lending and the collateral for the loans it provides. • For BinckBank, counterparty risk is the risk it incurs on counterparties in financial transactions itself, after a price has been agreed but before the transaction has actually been settled. If the counterparty defaults, BinckBank is exposed to the risk that a similar transaction can only be effected on less favourable terms.

Even though the mortgage portfolio has grown, the risk profile regarding credit risk is stable. The size of the mortgage portfolio, consisting of Dutch residantial mortgages, increased from € 737 million at the end of 2017 to over € 805 million at the end of 2018. However, the Loan-to-Value ratio (weighted average) of the mortgage portfolio fell in 2018 due to repayments and rising house prices.

61 RISK MANAGEMENT

Partly as a result of the ECB’s buying programme, it has become increasingly difficult to invest in short-term bonds with a positive yield. As a result, the bulk of the atio funds entrusted to us are held in cash with the central banks. The investment portfolio, which decreased in size in 2018, consists largely of investment-grade bonds from European banks.

In 2018, BinckBank entered into derivative transactions (plain vanilla interest rate swaps) aimed at hedging interest rate risks. This exposes the bank to a counterparty risk. A central counterparty (CCP) is used to clear these transactions.

The volume of securities lending continued to grow in 2018. This service is offered to customers and they receive a fee for the illion loaned securities. The risk on these transactions is largely hedged by collateral deposited by the securities borrower.

COLLATERALISED LENDING BinckBank offers customers various forms of lending against securities collateral. This collateralised lending can be used to cover margin requirements or for the purchase of securities. BinckBank runs a (potential) credit risk in respect of the customer in both cases. Due to the natureof teof alethe of collateralised te collateal loans and the surplus collateral received, the credit risk is limited.

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MORTGAGES BinckBank began investing in the financing of Dutch residential mortgage loans in 2016. It acts as the lender in a collective structure in which Dynamic Credit, an AFM-licensed service provider, provides the marketing, sales, administration, and management. These mortgages are issued in accordance with strict acceptance criteria. BinckBank has also purchased an existing residential mortgages portfolio from Obvion, in which strict credit quality standards have been set. Below is an overview of the quality of both mortgage portfolios based on the loan-to-value (LTV) ratio. The mortgage portfolio had no credit losses in 2018.

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62 illion

of te ale of te collateal RISK MANAGEMENT

IMPAIRED LOANS Impaired loans are credits on which arrears in payments have arisen by the borrower. On impaired loans, a provision is made on the basis of the expected credit loss. At the end of 2018 0.05% of the credit portfolio comprised impaired loans (2017: 0.08%). A provision of 65% has been made on this (2017: 63%). The provisions on the loans in stage 2 and 3 thus amounted to € 767 thousand. More information can be found in the chapter Risk management in the financial statements under note 41.5 Credit risks.

LIQUIDITY RISK Liquidity risk is the risk that BinckBank will not have sufficient cash or other liquid assets at its disposal to meet its financial obligations towards its account holders. This applies both under normal circumstances and in times of stress. BinckBank takes a careful approach to the liquidity risk and strives for solid liquidity buffers. Procedures, processes, and reports pertaining to liquidity management are set out in our internal liquidity adequacy assessment process (ILAAP), which is evaluated annually by the regulator.

In 2018, we maintained our robust liquidity buffer, both in terms of size and composition, as appropriate to our risk profile and risk appetite. BinckBank has a strong liquidity position. At the end of 2018, the total liquidity buffer was € 1.4 billion (2017: € 1,3 billion) with a liquidity coverage ratio of 2,131% (2017: 987%). The 2018 ILAAP was evaluated as adequate in both qualitative and quantitative terms. The liquidity risk stress scenarios were revised in 2018 to better assess whether BinckBank can continue to meet its obligations even in times of long-term liquidity stress. Bank-specific and market-wide stress factors are taken into account for this purpose. Results of these scenarios are discussed monthly by the Asset & Liability Committee (ALCO). The results of the stress tests showed that BinckBank is structurally capable of coping with acute and maintained liquidity stress. During 2018, there were no incidents in which risk appetite limits were exceeded.

The persistently low interest rate level in the Eurozone puts pressure on BinckBank’s earnings model and presents a challenge in areas such as balance sheet management, interest rate risk, and finding acceptable investments for the investment portfolio. The ECB’s asset purchase programme continues to result in rising prices and falling returns of the bonds included in BinckBank’s investment policy. The further increase in funds entrusted in 2018 and the scarcity of bonds for the investment portfolio that match BinckBank’s desired risk/return profile drove BinckBank’s liquidity position up further in 2018. While the structurally comfortable liquidity position does create a sizeable buffer for the liquidity risk, it also puts pressure on the interest rate results, since BinckBank maintains the cash on its account with De Nederlandsche Bank and must make interest rate payments of 40 basis points on this. The interest rate charges for maintaining cash on the account with De Nederlandsche Bank was € 7,1 million in 2018, compared to € 5.7 million in 2017.

INTEREST RATE RISK Interest rate risk relates to the sensitivity of the interest rate result and/or the market value of the bank to interest rate movements. When there is movement in the yield curve, interest cash flows, and/or the cash value change accordingly. Interest rate movements can thus affect both the interest rate result and the bank’s market value. BinckBank pursues a prudent interest rate risk policy, considering both the short-term interest and the long-term interest rate risk.

The following matters are assessed when determining and managing the interest rate risk:

• optimising the economic value of current and future interest cash flows and achieving a stable interest result; • behavioural aspects of the on demand funds entrusted; • expectations regarding early repayment on the mortgage receivables.

Within BinckBank, an interest rate risk committee monitors developments in the interest rate risk on a monthly basis and makes adjustments where needed. Stress scenarios of the current and future interest rate environment are also performed in the Internal Liquidity Adequacy Assessment (ILAAP) and the Internal Capital Adequacy Assessment (ICAAP) to determine the potential impact on BinckBank’s capital and possible liquidity position.

The short term interest risk is addressed from an earnings-at-risk perspective. The earning-at-risk analysis analyses the sensitivity of the one- and two-year interest result under various interest rate scenarios. For the long-term interest rate risk in particular, the Economic Value of Equity (EVE) calculation is used. This calculation considers the change in value of the equity as a result of interest rate movements. The change in the economic value of equity is determined with stress scenarios of the interest rate curve (parallel, non-parallel, and reverse interest rate movements). The maximum negative value change is used here as the control measure. Besides the general value adjustment, the interest rate curve is divided into key rate buckets and these key rates are stressed independently of each other. Internal limits are also set and monitored in this regard.

63 RISK MANAGEMENT

During 2018, a negative change in the value of the EVE was mostly because of a parallel increase in interest rates. Part of this risk is mitigated by entering into interest-rate swap positions. In 2018, the continuation of the European Central Bank’s asset purchase programme led to a continuation of extremely low short-term market interest rates and pressure on interest income from BinckBank’s short-term and liquidity exposure.

MARKET RISK Market risk at BinckBank is expressed in the currency risk. Currency risk is the risk presented by movements in the value of items denominated in foreign currencies due to movements in exchange rates and its effect on BinckBank’s capital and/or results. The policy is not to take active foreign-exchange trading positions. Currency positions therefore can arise only as a result of facilitating customer transactions. Such currency positions are hedged on the same day. Remaining net overnight positions are hedged on the next trading day and do not exceed € 200 thousand per currency on average. BinckBank positionsconsiders this to be accepted risk.

OPERATIONAL RISK Operational risk is the risk of losses caused by inadequate or deficient internal processes and systems, human error, or external events. Due to the nature of its business activities, BinckBank has a high inherent operational risk. Operational risk is determined by various factors, including the large number of complex administrative entries that must be processed daily. A framework of policies, processes, systems, and accompanying control measures has been established to consistently control operational risks. Together with a clear organisational structure within the 3LoD model, this forms the basis for the design of the internal control system. Another important aspect of the operational risk is that communication with the customer and third parties (stock exchanges) is primarily via the internet or telephone. This results in a high dependence on ICT and external connections. ICT shortcomings can result in a significant threat to critical business processes and customer service. Specific control measures have been implemented to reduce this risk. These include measures in the areas of ICT administration, software development, and cyber security. Despite the large number of risk-mitigating measures in the risk management framework, it is still possible for BinckBank to be confronted with incidents that can lead to an operational loss. BinckBank has insurance coverage for certain types of operational loss. This insurance includes policies for directors’ and officers’ liability, corporate liability, professional liability, inventory, reinstatement costs, trading loss, and cybercrime.

In the interest of its stakeholders, BinckBank is constantly striving as an organisation to improve its business processes, products, and services. This ‘run and change the business’ approach means that BinckBank is in a state of continuous change. Continuous change can cause various operational risks that must be managed adequately. BinckBank applies various risk assessment methods to identify risks and define and implement mitigating actions, both to support the implementation phase of a change and during the life cycle of a product or service. In the context of risk management within projects, there are also multidisciplinary collaborations as part of the change and product approval process. Risk assessments are also performed at a corporate level in order to identify bank-wide risks and any external threats.

Besides the effective control of risks in the business processes, there is also a continuous focus on making these processes and the control framework more efficient. This includes the agile transformation within the BinckBank organisation, which took added shape during 2018, and the way in which risks in change projects are actively and structurally managed. Continuous attention is also paid to resolving and preventing legacy in the design and architecture of software applications and to replacing old software codes, both of which contribute positively towards efficient business processes.

Information security is regarded as a company-wide responsibility to protect customer and commercial information. BinckBank does everything possible to protect personal data in accordance with the applicable privacy legislation. Adopting the appropriate measures based on targeted risk assessments for business and ICT processes guarantees that the data of our customers and our own commercial data are properly protected.

Cybercrime can damage trust in our bank and our reputation. Every day BinckBank focuses on identifying and mitigating these risks. By continuously improving protective measures, detection, and response, BinckBank is able to prevent attacks as much as possible, or to detect them in time and respond adequately to them, in order to also remain resilient in future.

Internal and external fraud remains a major concern for financial institutions. In order to prevent fraud, BinckBank focuses on its employees and customers by creating awareness and sharing lessons learned within BinckBank. BinckBank continuously monitors existing and new forms of fraud techniques and is continuously strengthening and innovating its control framework.

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BinckBank invests continuously in the stability of the various trading platforms. The uptime KPIs are defined annually, differentiating between availability during and outside trading hours. Planned maintenance is always performed outside trading times. The continuous availability of critical services and the security of data of customers, visitors, and employees are of the utmost importance to BinckBank. To ensure the availability of critical services, BinckBank has implemented a business continuity management (BCM) process. BCM forms part of the risk management framework. The business continuity council meets at least twice a year. If a disaster occurs, this council also acts as the crisis team and operates on the basis of a clearly defined and tested crisis management process. BinckBank has set up a fully equipped ICT disaster recovery environment for Business Continuity purposes. This disaster recovery environment runs actively in parallel with the primary production environment, which alongside continuity also enhances the processing capacity. There is an annual contingency test to check the transition from the production environment to the disaster recovery environment. As well as the disaster recovery facilities for the ICT infrastructure, BinckBank also has use of a disaster recovery location with an office facility.

DEVELOPMENTS IN 2018 Cyber Security In 2018, there was a further increase across the entire industry in phishing and spearphishing attacks, ransomware, Advanced Persistent Threats, DDoS attacks, and data breaches. Cybercrime can reduce trust in our bank and damage our reputation. In 2018, BinckBank took further steps towards identifying and mitigating these risks. With the improvements made in protection, detection, and response measures, BinckBank is now able to prevent or detect as many attacks as possible and respond to them adequately. This has increased BinckBank’s cyber resilience, and we will continue to act on risks so that we also remain resilient in future.

Operational Excellence In 2018, BinckBank initiated a Proof of Concept to automate processes that cannot be solved with existing automation tools in use within BinckBank. This was an important step towards further enhancing the customer experience. In addition, the next phase of the Agile Transformation, ‘DevOps’ to better facilitate cooperation between the software development and technical operational teams, started in 2018.

Migration of Independent Asset Management In 2018, BinckBank started preparations to migrate the Independent Asset Management activity to the Retail platform. This migration will entail phasing out the current BPO platform, a big step in reducing the IT legacy, and simultaneously taking a step towards further improving the Retail platform. The phasing out of the platform will further reduce the operational risk profile, because BinckBank will only need to maintain a single IT (retail) platform. This activity will be migrated in 2019.

Pro Trader The development of the new web-based ProTrader , a trading application for our most active customers, was completed in 2018. At the end of 2018, all customers migrated to this new application. The old legacy platform will be technically removed at the start of 2019.

Customer contact centre BinckBank started implementing a new communication integration platform in 2018. This facilitates the integration of customer communication across all channels with existing applications used by BinckBank.

Pricing With the introduction of the new tariffs for Binck in 2018, a simultaneous start has been made to rebuild the calculation and settlement in new software architecture. This greatly improves the customer experience and the operational process, thereby also mitigating risks. Implementation was finalised in the fourth quarter of 2018.

Optiq Euronext continued to introduce its new trading platform in 2018. In the past year, BinckBank has adapted its platform to ensure compliance with the changed order flows. BinckBank expects it will have to keep carrying out work in 2019 to remain active on Euronext’s new trading platform.

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COMPLIANCE RISK Compliance risk is the risk of financial losses and/or reputational damage for failing to adequately comply with applicable laws and regulations, internal policy and codes of conduct, BinckBank’s values, and the standards generally accepted within the market. We strive to manage compliance risks effectively so negative situations do not arise for our customers, employees, shareholders, and other stakeholders. We have defined four priorities in this regard:

• Employees • Financial products and services • Integrity of our customers and business partners • Protection of personal data

Employees: An ethical organisation is underpinned by ethical employees. The conduct BinckBank desires is described in the code of conduct, internal rules, the regulations on private investment transactions, and the policy on potential conflicts of interest. Employees are trained in what is expected of them and held accountable for undesirable behaviour.

Financial products and services: BinckBank wants to offer transparent and ethical products that deliver added value to our customers. Customer centricity is the starting point of any evaluation of new and/or existing products and services. Our employees put the customer’s interest first in all their actions. Customer communication and advertising are drafted in clear and concise language, so customers are not misled, products and services are periodically evaluated, and customers are assisted by our investment in investment education.

Integrity of our customers and business partners: Preventing integrity risks such as money laundering, the financing of terrorism, and fraud remains a challenge for the financial sector. As BinckBank does not offer payment services and operates in a limited number of countries, this risk is reduced. Customer Due Diligence (CDD) processes aim to know our customers and business partners well and thus mitigate the risk. Besides this process, BinckBank monitors transactions for potential risks of money laundering, the financing of terrorism, fraud, and potential cases of market abuse. If necessary, suspicious transactions are reported to the authorities.

Protection of personal data: BinckBank treats all personal data of employees, customers, and other associates with the utmost care, so they can rest assured that the privacy of their personal data is guaranteed.

The management of compliance risks is based on a fixed cycle that runs from risk analysis and the implementation of new legislation and regulations, to monitoring and reporting. This is based on the integrated risk and control framework, which for compliance risks is based on all relevant legislation and regulations and internal standards.

DEVELOPMENTS IN 2018 Many new regulations came into force in 2018, such as the Markets in Financial Instruments Directive/Regulation (MiFID II/MiFIR), the General Data Protection Regulation (GDPR), Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs), and the Implementation Act for the Fourth Anti-Money Laundering Directive (Wwft). Implementing this new legislation has had a major impact on BinckBank’s internal organisation in terms of tightening up its policy, processes, systems, and procedures.

Even after MiFID II entered into force on 3 January 2018, BinckBank continued to devote a great deal of attention to embedding MiFID II in its business processes. Besides MiFID II, the PRIIPs regulations have also come into force. As a consequence since 2018, our customers can no longer purchase any financial products for which no Key Investor Information Document (KIID) is available.

Following amendments to the Wwft, our customer integrity policy was tightened further in 2018. Through specific guidance and training, BinckBank enables its employees to effectively recognise and assess the risk of money laundering, financing of terrorism, and fraud.

The systematic integrity risk analysis (SIRA) was carried out for the entire organisation in 2018. The purpose of the SIRA is to obtain an ongoing and comprehensive understanding of the integrity risks that BinckBank faces. The integrity risk profile forms the basis for targeted improvement actions and the compliance monitoring programme.

The General Data Protection Regulation (GDPR) entered into force on 25 May 2018. As part of the implementation of the GDPR, all systems, processes, and agreements with third parties were assessed and, where necessary, measures were adopted to adequately protect personal data. All BinckBank employees have also been prepared through training courses for the impact of the new privacy legislation on their daily work.

RISK MANAGEMENT

Capital management

BinckBank’s capital requirement is determined on the basis of the risk appetite and strategy, taking into account the expectations and requirements of external stakeholders. Capital adequacy is monitored constantly and compared with the risk appetite and strategy. The current and future capital adequacy is discussed monthly in the ALCO, where resolutions can be adopted for taking corrective steps. A capital plan, drawn up once a year, contains information about the strategic and tactical principles, as well as projections of the expected movements in the capital position. This plan is included in the ICAAP documentation.

The regulator DNB (De Nederlandsche Bank) periodically evaluates capital adequacy via the Supervisory Review and Evaluation Process (SREP) and sets SREP requirements based on that evaluation. This requirement is intended not only to cover the pillar I risk types but also pillar II risk types. Capital must also be maintained for the additional CRD capital buffers, being the capital conservation buffer and countercyclical capital buffer. BinckBank uses as internal capital standard in its risk appetite statement a Total Capital Ratio (TCR) of at least 22.2% including full capitalisation of the capital buffers and an internal mark-up.

The leverage ratio at the end of 2018 was 6.3% (end of 2017: 6.6%), which is high compared to other Dutch banks. Our leverage ratio is considerably higher than the minimum CRR requirement of 3%.

DEVELOPMENTS IN REGULATIONS CONCERNING CAPITAL Since the financial crisis, various measures have been taken to prevent banks from experiencing financial difficulties again in future. These measures include more stringent requirements regarding the size and quality of own funds that banks should hold and radical changes have also been made to the supervision of banks. In 2016, the phasing in of the capital conservation buffer and countercyclical buffer started. And further measures have been proposed to improve the resolvability of a bank should it nevertheless encounter problems despite these precautions.

On 5 December 2018, the European Parliament announced that it had reached agreement with the European Council of the EU on the Banking Package – the Capital Requirements Directive V (CRD V), Capital Requirements Regulation II (CRR II), Bank Recovery and Resolution Directive II (BRRD II) and the Single Resolution Mechanism Regulation II (SRMR II). The Plenary will have to officially adopt the agreement, the vote is expected to take place early next year. In its announcement of the agreement the European Parliament noted that two deals are set to be concluded with negotiators, concerning bank resilience, and a roadmap for banks to deal with losses.

The first deal concerns amending the EU’s prudential requirements (CRD V/CRR II) by increasing lending capacity and creating deeper and more liquid capital markets. With regards this deal, negotiators have agreed to:

• ensure that banks are treated proportionately, depending on their risk profiles and systemic importance. MEPs have inserted the definition of a ‘small and non-complex institution’, which should be subject to simplified requirements, particularly in relation to reporting; • a binding 3% leverage ratio and an additional 50% buffer for global systemically important institutions (G-SIIs); • a simplified net stable funding ratio (NSFR), rules to assess whether an institution has sufficient stable funding to meet its funding needs over a one-year period, under both normal and stress conditions;, and • extension of the capital requirements to SME exposures of more than € 2.5 million.

The second agreement relating to bank resilience concerns the BRRD II and the SRMR II. Key areas of consensus include:

• the requirement that global systemically important banks (G-SIBs) comply with the total loss-absorbing capacity of the Financial Stability Board (TLAC), while non-G-SIBs remain subject to the EU Minimum Requirement for own funds and Eligible Liabilities (MREL) rules; • amending the eligibility criteria for the instruments and items that can count towards compliance with the MREL rules, and aligning these with the eligibility criteria in the TLAC standard for the TLAC minimum requirement; • introducing rules for the use of a moratorium to suspend payments by banks in difficulty; • introducing lessons learned from recent resolution cases in the BRRD; and • including provisions to protect private investors from holding bail-inable bank debt when it is not an appropriate retail instrument for them. The negotiators also agreed that any financial contract managed by a third country in the EU is subject to resolution rules.

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In the event of the imminent or actual insolvency of a bank, a distinction is made between two phases. During the going- concern phase, a bank can still attempt to overcome its problems. If this is no longer possible, the bank then enters the resolution or settlement phase, in which the losses are recognised and the bank is recapitalised. The viable parts of the bank are continued or sold and the non-viable parts are dismantled. The aim is to minimise the adverse consequences of a bank insolvency for society.

MREL and TLAC are closely related to one another. Both place requirements on the amount of own funds to be held and on the amount of bail-in-able debt capital. MREL is relevant for all banks that operate in the European Union (EU) and TLAC is a requirement that applies specifically to global systemically important banks. MREL requirements are geared towards expanding the absorbing capacity and resolvability of banks during the gone concern phase. The European Banking Authority (EBA) has proposed criteria for the determination of the MREL. The relevant national resolution authority then establishes the specific amount of the MREL based on the risk profile of individual banks; for BinckBank this is the Nederlandsche Bank (DNB). The systemic importance of a bank is an important factor in this risk profile. DNB has indicated that they will take a definite stance once the SRB Policy is finalised (expected H1 2019). Banks can choose to fulfil the MREL requirement with either its own funds or with bail-in-able debt capital. At this time BinckBank has chosen to fulfil any future MREL requirements with own funds.

During 2018 the Dutch GSIB’s have communicated the MREL imposed on them by the Financial Stability Board (FSB) based in the Total Liabilities and Own Funds (TLOF) which approximates to 27% of the Total Risk Exposure Amount(TREA). The FSB has indicated that it will move away from the TLOF as a basis for determining the MREL and that they wish to align this with the TLAC requirements which are based on the TREA and the Leverage Ratio Exposure (LRE). Based on a high level analysis, based on the information currently available, BinckBank expects the MREL requirements to lead to higher capital requirements similar to those of GSIB’s.

Because the eventual implementation of the rules through European regulations will be decisive for European banks, it is very difficult at this stage to estimate the extent of their impact.

Liquidity management

Liquidity risk is the risk that BinckBank will not be able to meet its payment obligations. BinckBank adopts a prudent liquidity policy designed to ensure that customers’ demand for their cash can be met at all times. There were no materially significant liquidity incidents in the reporting year 2018.

The most important objective of our liquidity risk management is to ensure that the bank is capable of retaining or generating sufficient cash liquidity to meet its payment obligations completely as soon as they are payable, at acceptable conditions. One of the most important elements of our approach to liquidity risk management is maintaining stakeholder confidence in the bank’s solvency. The policy for measuring, monitoring, and controlling liquidity risks within BinckBank is defined in the Internal Liquidity Adequacy Assessment process (ILAAP), which is updated annually and evaluated by the regulator.

BinckBank has no need for external funding and considers the funds entrusted as a stable source of funding. Nonetheless, the share of customer deposits in our financing profile is the biggest liquidity risk to which we are exposed. Although the funds entrusted have proved to be relatively price-inelastic and stable over the years, there are potential outflow risks in their immediately callable nature, especially insofar as deposits do not fall under a deposit guarantee system (DGS).

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IN CONTROL STATEMENT

In the risk management chapter of the annual report and note 41 to the annual report, we have given a detailed description of our risks and our risk management framework.

Our internal risk management and control systems are based on a risk-identification process combination with a fixed set of detection, prevention, and control measures. This provides reasonable assurances that the financial reports do not contain any material misstatement and that the internal risk management and control systems related to the financial reporting risks have operated effectively during the year under review.

STATEMENT OF THE EXECUTIVE BOARD In accordance with section 5:25c of the Financial Supervision Act (Wft) and best practice provision 1.4.3 of the Corporate Governance Code, we state that according to the best of our knowledge:

• the financial statements present a true and fair view of the assets, the liabilities, the financial position, and the profit of BinckBank N.V. and the companies included in the consolidation; • that the report of the Executive Board gives a true and fair view of the situation as at 31 December 2017, the course of business during the financial year of BinckBank N.V. and its affiliated companies, whose data have been included in its financial statements, and that the annual report describes the essential risks faced by BinckBank N.V.; • the management statement provides a sufficient degree of insight into the shortcomings in the functioning of the internal risk management and control systems; • the aforesaid systems offer a reasonable degree of certainty that the financial reporting does not contain any material inaccuracies; • in view of the current situation, drafting the financial reporting on a going concern basis is justified; and • the report states the material risks and uncertainties relevant to the expectation of continuity of the company for a period of twelve months after the drafting of the report.

Our internal risk management and control systems cannot, however, provide absolute certainty that the strategic and financial targets will be achieved, or that the legislation and regulations will be complied with at all times. Furthermore, risk management and control systems cannot prevent all human errors or errors of assessment nor are these systems able to withstand situations in which employees collude together and in which the integrity and reliability of employees cannot be guaranteed. The acceptance of risk and implementation of control measures is always subject to cost/benefit considerations, and is an inherent part of entrepreneurial activity. We continue to strive to further improve and optimise our internal risk management and control procedures. Without prejudice to our statement, we would like to refer to the weaknesses and threats as described in the SWOT analysis of the report of the Executive Board.

Amsterdam, 11 March 2019

The Executive Board Vincent Germyns, Chairman of the Executive Board (CEO) Evert-Jan Kooistra, member of the board (CFRO) Steven Clausing, member of the board (COO)

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From left to right: Marijn Pijnenborg , Jeroen Princen, Carla van der Weerdt-Norder, Arjen Soederhuizen, John van der Steen and Hanny Kemna. REPORT OF THE SUPERVISORY BOARD

MESSAGE FROM THE CHAIRMAN OF THE SUPERVISORY BOARD

Dear reader,

Here you will find the report of the Supervisory Board for the year 2018.

In addition to the usual operational activities in 2018, the second half of the year was largely dominated by the assessment of a potential public offer from Saxo Bank. on the outstanding shares in BinckBank N.V. The Supervisory Board has of course been closely involved from its supervisory role and has consulted extensively in this respect. Such a process is, by its very nature, intensive and requires careful consideration and consideration of all interests involved. The Supervisory Board has conducted the discussions in that context and was also regularly informed by the Executive Board about the discussions with Saxo Bank and the Works Council. This months-long process with Saxo Bank has resulted in balanced outcomes that will contribute to accelerate the execution of our strategy. The execution of the intended public bid of and by Saxo Bank will take effect in 2019.

At the same time, attention was focused on the operational activities and implementation of our own strategy with the Relaunch of new products and services that further advance the revised strategy announced in 2015 (ReThink Binck). This strategy provides a solid basis for a more diversified and future-proof revenue stream aimed at sustainable growth of the company. The company’s investment policy was further implemented in 2018 through an expansion of investments in mortgages.

In 2019, the products and services that have been launched will be made even more visible in the market through intensified marketing efforts and, where necessary, be further improved and expanded. The investments in the new strategy will have to pay off even more in 2019 in the form of a broader and predictable revenue stream. Cost control will also receive additional attention in 2019.

During the 2018 financial year the Supervisory Board held multiple meetings amongst themselves and also with the Executive Board. Mr Princen joined the Supervisory Board in 2018. With the appointment of Mr Princen, the Supervisory Board consists of a total of six people.

The annual accounts have been audited by Deloitte Accountants B.V. (Deloitte) and provided with an unqualified auditor’s report. The unqualified auditor’s report is included on pages 213 through 217.

The Supervisory Board would like to express its appreciation to the Executive Board and the other employees for the commitment and involvement shown in 2018. It was a special and important year for BinckBank.

Amsterdam, 11 March 2019

J.W.T. van der Steen Chairman of the Supervisory Board

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DUTIES OF THE SUPERVISORY BOARD

The Supervisory Board is charged with oversight of the Executive Board’s policy of long-term value creation and the general developments at the company and its affiliate. The Supervisory Board oversees the internal audit function and compliance with procedures to report actual and suspected abuses and irregularities. In the exercise of its duties, the Supervisory Board focuses on the interests of the company and its affiliate, taking the interests of those involved in the company into consideration. The Supervisory Board is involved in the social aspects of business operations relevant to the company and also advises the Executive Board. It is further tasked with all duties assigned to it by law and under the articles of association. Certain key resolutions of the Executive Board are subject to the approval of the Supervisory Board.

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COMPOSITION OF THE SUPERVISORY BOARD

COMPOSITION The current composition of the Supervisory Board is:

• J.W.T. van der Steen (chairman) • C.J. van der Weerdt-Norder (vice-chairman) • J.M.A. Kemna • K. Pijnenborg • J.G. Princen • A. Soederhuizen

The information about the Supervisory Board members, as referred to in best practice provision 2.1.2 of the Corporate Governance Code, is provided on pages 52 up to and including 56.

During the general meeting in 2018, Mr Van der Steen, Ms Van der Weerdt-Norder, and Ms Kemna were reappointed to the Supervisory Board. Ms Van der Weerdt-Norder was nominated by the works council based on its enhanced right of recommendation. During the extraordinary general meeting in 2018, Mr Princen was appointed to the Supervisory Board after the works council’s enhanced right of recommendation. Mr Princen has a background in the legal profession and regularly acts as bankruptcy trustee. The Supervisory Board now consists of a total of six members, namely Mr Van der Steen (chairman), Ms Van der Weerdt-Norder (vice-chairman), Ms Kemna, Mr Soederhuizen, Ms Pijnenborg, and Mr Princen.

INDEPENDENCE The composition of the Supervisory Board is such that the supervisory directors can operate independently within the framework of the Supervisory Board’s profile description, both in relation to each other and the Executive Board. The Supervisory Board meets the requirements of independence as defined in best practice clauses 2.1.7 to 2.1.9 of the Corporate Governance Code.

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MEETINGS OF THE SUPERVISORY BOARD AND SUBCOMMITTEES

MEETINGS OF THE SUPERVISORY BOARD

FREQUENCY The Supervisory Board held its regular combined meetings with the Executive Board in attendance on seven occasions in 2018. Furthermore meetings were held relating to the public offer as described below. The meetings were spread over the year. In addition, the chairman, and on certain occasions other members of the Supervisory Board, held frequent informal discussions with the executive directors and other members of the organisation. The Supervisory Board also met a further four times in its own meetings in 2018. The number of meetings illustrates the close involvement of the Supervisory Board in the company. The Supervisory Board will pursue a comparable schedule of meetings in 2019.

ATTENDANCE The supervisory directors each attended or conferenced in to all meetings. The availability of the supervisory directors and the Executive Board for interim consultation was good. The attendance rate of the individual supervisory directors at the 2018 meetings was as follows:

J.W.T. van der Steen 100% C.J. van der Weerdt-Norder 100% J.M.A. Kemna 100% M. Pijnenborg 100% J.C. Princen 100% A. Soederhuizen 100%

AGENDA ITEMS

GENERAL Supervisory Board meeting agendas covered virtually all aspects of the company’s business. Items discussed during the meetings included the strategy for long-term value creation, the culture within the organisation, the interests of the various stakeholders, the principal risks associated with the enterprise and risk appetite, innovation, potential acquisitions, corporate scenarios, the results of the Executive Board’s evaluation of the design and operation of the internal risk management and control systems, and significant changes to them. Attention was also devoted to matters such as staffing, legislation and regulations, the budget, and internal and external financial quarterly, half-yearly, and annual reports. Recurring and mandatory items such as the regular progress reports were also dealt with in the Supervisory Board meetings.

SPECIFIC Specific items addressed in 2018 included:

Strategy and long-term value creation In 2018, the Supervisory Board continued to uphold its responsibility to be involved in the implementation and monitoring of the Relaunch phase of the company’s new strategy that was presented in 2015 (ReThink Binck). The emphasis in 2018 was on the progress and quality of marketing the new products and services (Relaunch Binck). The refined new strategy is intended to provide a response to the challenges that the business faces in the longer term.

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For long-term value creation, further diversification of sources of income, products, and services is desired, and the refined strategy addresses this. In 2018, the new strategy gained its first commercial traction (Relaunch Binck) with the introduction of the announced products and services. The introduction of a new pricing model for the Netherlands business unit and the launch of a life insurance product in France (‘Assurance Vie’) are subjects that were discussed from various angles in 2018.

The Supervisory Board has spoken with the Executive Board about the options for accelerating the ‘Relaunch’ phase of transforming the company, by partnering with other parties and achieving economies of scale in the process. This could create a better position for BinckBank if a potential consolidation within the financial sector occurs, and will maintain focus on value creation for the long term. At corporate level, the sale of the subsidiary Think ETF Asset Management was finalised in 2018.

During the process that started after the initial approach by Saxo Bank, the Management Board and the Supervisory Board held consultations on a regular basis about the progress of the negotiations with Saxo Bank. The Supervisory Board has fulfilled its role in the design and implementation of a process in which careful consideration of the interests of the various stakeholders is ensured as far as possible. The Supervisory Board met on a regular basis regarding the Saxo Bank project, where they were assisted by their respective advisers. In addition, in response to the receipt of Saxo Bank’s proposal, the Executive Board and the Supervisory Board established a transaction committee in October 2018, consisting of a delegation of the Supervisory Board and the entire Management Board. The transaction committee subsequently met on a weekly basis. At an early stage the Supervisory Board consulted with the works council so as to enable them to fulfil their responsibilities properly and in a timely manner. The Supervisory Board also held a meeting with Saxo Bank and also met with representatives of the DNB.

The company’s capital policy is closely linked to its strategy and risk acceptance. In 2018, the risk appetite was assessed and approved within the Supervisory Board. This policy and the dividend policy it provides for formed another item on the Supervisory Board’s agenda. In the context of the capital policy, the Supervisory Board has also been involved in the Treasury investments in mortgages. The goal of this investment in mortgages is to generate stable interest earnings within the risk acceptance profile established by the Supervisory Board.

Remuneration policy The remuneration policy is in line with the amended legal requirements and provides a solid basis for attracting and retaining qualified executive directors. The variable pay component has been limited to the statutory maximum. Previously granted variable pay components were also reassessed. Under supervision of the Supervisory Board, research has been carried out into relevant developments in the area of remuneration.

Achievement of Executive Board targets in 2018 The Supervisory Board fulfilled its responsibility in determining the Executive Board targets and monitoring their achievement in 2018. These targets were selected carefully and simplified further. The Supervisory Board considers it important that the established targets should be as measurable as possible. The Supervisory Board has also held discussions with the individual executive directors regarding their ambitions for the future, and incorporated them into the definition of the personal targets for 2019. The proposed appointments or reappointments of executive and Supervisory Board members were also discussed during the meetings.

Cultural programme The company’s culture was discussed with the Supervisory Board. The correct culture is an important foundation for the future-proof development of the company and successful implementation of the new strategy (ReThink Binck). The culture provides a clear guideline for the organisation’s conduct and attitude. The company’s core values and culture received a great deal of attention in 2018, with the Supervisory Board closely involved from within its role. The company’s Executive Board and managers have followed a Management Development programme. Various interactive sessions have also been held at all levels of the company, focusing on connectivity (Reconnect) and raising employee satisfaction. The results were evaluated and discussed with the organisation. Many initiatives have been taken from the People Track to create an even more vital and energetic organisation in which healthy nutrition and adequate exercise are promoted.

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Competitive position Various aspects and facets of the company’s competitiveness were assessed during the Supervisory Board meetings. The goal is to transform the business in a way that sufficiently guarantees long-term value creation. Diversification of income sources, products, and services plays an important role in this regard. And it is not only the competitiveness of new propositions that is relevant here, but also the competitiveness of the existing propositions, which are clearly still the most important sorce of income at present. The development of new technologies, such as blockchain, and the emergence of zero-fee brokers also play a meaningful role in this regard.

Brand positioning The transition from a multibrand to a monobrand positioning and the related farewell to the Alex brand were discussed. The careful guidance of Alex customers during the transition to Binck received particular attention in this process. The switch to monobrand positioning has also had organisational consequences that were discussed. The company’s Purpose (Partner in independence) was discussed in conjunction with the new products and services offered.

2019 Budget The 2019 budget was comprehensively discussed and approved during the Supervisory Board meetings. The transition to more diversified sources of income will also affect the budget and related objectives in 2019. And attention will continue to be paid to cost trends.

Evaluation of the Supervisory and Executive Boards The annual evaluations of the supervisory and Executive Boards, as prescribed under best practice 2.2.8 of the Corporate Governance Code, took place in 2018. The evaluation of the Executive Board was based on individual interviews and feedback from managers. The associated conclusions were discussed with the relevant bodies and individual members, and incorporated in collective and personal goals for those involved. In 2018, the executive directors continued to honour their individual commitment to acquire BinckBank shares during their term of office, each time after the publication of the quarterly figures, as announced in the press release of 25 April 2016. The evaluation of the Supervisory Board was conducted on the basis of a questionnaire completed by all members and a subsequent panel discussion of the responses. This evaluation was set out in a report.

Relationship with the works council The Supervisory Board attaches importance to maintaining a transparent, proactive and constructive relationship with the works council. After all, it is the works council that represents the employees who must ultimately deliver the results. Partly because BinckBank qualifies as a two-tier board company, the involvement of the works council on certain issues is considered fundamental in the eyes of the legislator. During the year under review, regular meetings were held with representatives of the Supervisory Board and the works council. Cooperation is proceeding satisfactorily.

Shareholder relations In 2018, the relationship with shareholders and potential shareholders was less frequently addressed in periodic roadshows and conferences. This is appropriate to the phase in which the strategic transformation (Relaunch Binck) is being implemented. During the meetings, presentations were given on the basis of public information, and the results were discussed with the Supervisory Board.

Audit committee meetings in 2018 The Supervisory Board has appointed an audit committee from among its members. Ms Van der Weerdt-Norder has chaired the audit committee since October 2014. The other audit committee members are Messrs Van der Steen, Soederhuizen, and Princen (since September 2018). The meetings were attended by the audit committee members and Messrs Germyns (Executive Board chairman) and Kooistra (CFRO), the IAD manager, and the Governance, Risk & Compliance manager.

The audit committee meets the applicable independence requirements and has sufficient members with the required financial expertise. The audit committee met four times in 2018, spread over the year. All meetings were attended by the Executive Board chairman and the BinckBank’s CFRO. The audit committee also met with the external and internal auditors in the absence of the Executive Board.

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Supervision of the company’s provision of financial information is the responsibility of the Supervisory Board. The audit committee is responsible for overseeing the design, continuity, and functioning of the internal control system and risk management measures, for monitoring the implementation of recommendations by the external auditor and the IAD, and for the functioning of the IAD. During its regular review of the annual and half-yearly results, the audit committee satisfied itself that the figures had been approved by the external auditor without material changes, and no unforeseen circumstances were brought to its attention.

The audits conducted by the IAD and their resultant findings and recommendations were the central focus of the audit committee meetings. Based on an analysis of the various risk categories summarised in the IAD management letter, the IAD generally assessed the design, continuity, and functioning of the internal control measures.

Special attention was devoted to information security, legislation and regulations (including MiFID II, Customer Due Diligence, Anti Money Laundering, GDPR, and SIRA), regulatory reporting, strategic projects, and governance. In a large number of audits, risk management was assessed as adequate. In the areas where the IAD lowered its judgement, appropriate steps have either already been taken or are in development, so the internal control can be considered adequate.

In addition to the discussion of internal and external audits, Compliance was a standing agenda item at every meeting. This always included a review of the current Compliance status. In audit committee meetings, the Governance, Risk & Compliance manager reported on subjects such as duty of care, customer due diligence, anti-money laundering, anti-market abuse, fraud, privacy, and conflicts of interest.

During the year, the audit committee devoted attention to the Regulatory Reporting Framework, the rollout of IFRS 9, the Tax Framework, and the whistleblowers’ scheme. The audit committee also evaluated the external auditor’s performance and the policy for non-audit services, and discussed establishing the independence of the external auditor. The relationship with and reporting to DNB and the Netherlands Authority for the Financial Markets (AFM) were also discussed. The audit committee also carried out a self-assessment facilitated by the IAD manager. The general opinion was that the audit committee functions properly.

Deloitte was first appointed as the external auditor of BinckBank in the general meeting of 22 April 2014. In the general meetings of 25 April 2016 and 24 April 2017, Deloitte was reappointed for the reporting years 2017 and 2018. The auditor is appointed to audit BinckBank N.V.’s financial statements. In accordance with the current rules of the Netherlands Institute of Chartered Accountants (NBA) governing independence, BinckBank’s external auditor only performs the audit and does not provide any advisory services.

Risk and product development committee meetings in 2018 The Supervisory Board has appointed a risk and product development committee (RPC) from among its members. The RPC currently consists of Mr Soederhuizen (chairman), Ms Van der Weerdt-Norder, Ms Kemna and Ms Pijnenborg. The RPC held four regular and three additional meetings in 2018. The RPC’s tasks include advising the Supervisory Board on the details of the company’s risk profile and its risk appetite. The RPC also oversees management of all relevant risks, including the strategic risk, the financial risks, and the non-financial risks. The customer’s interest and duty of care towards the customer in respect of new and existing products and services are regular items on the committee’s agenda. The RPC also monitors the adequacy of the company’s capital and liquidity.

For the purpose of fulfilling its role, the committee receives information in each meeting from the Legal, Treasury, and Project & Portfolio Management (PPM) departments, as well as the second-line Governance, Risk & Compliance (GRC) department. The Treasury department informs the committee about solvency and liquidity and their impact during times of stress. BinckBank’s interest rate risk and hedging policy was a much-debated topic in 2018. The committee was also informed about the composition of the investment portfolio. The expansion of the mortgage portfolio received significant attention in 2018. Legal informs the committee about the receipt or resolution of any claims. PPM informs the RPC about strategic projects. GRC informs the RPC in every meeting about the subjects discussed in the various risk committees within the organisation, partly based on the risk reporting drafted each quarter. This report covers the risk profile, in part on the basis of the defined risk appetite. This information allows the committee to identify any changes in the bank’s risk profile in due time.

79 REPORT OF THE SUPERVISORY BOARD

In 2018, BinckBank’s Relaunch and implementation of the strategy, including the positioning of the asset management products, the new pricing model in the Netherlands, and the commercial traction of the new products, were high on the RPC’s agenda. The RPC also paid a lot of attention to the introduction of the new ‘Assurance Vie’ product in France. Strategic people risk, including employee satisfaction, commitment, and continuity, were also discussed at length. The follow-up measures of the MiFID II implementation, the implementation of the Anti-Money Laundering Directive, and the associated compliance risks, were further important topics in 2018.

Remuneration committee in 2018 The remuneration committee is responsible for preparing the resolutions on remuneration, including those affecting BinckBank’s risks and risk management, which the Supervisory Board must adopt. The remuneration committee also prepares the Supervisory Board’s resolutions for selecting and appointing executive and supervisory directors. The remuneration committee’s members from the Supervisory Board are currently Ms Kemna (chairwoman), Mr Van der Steen, Ms Pijnenborg, and Mr Princen (since September 2018). The Executive Board chairman and HR manager also sit on the remuneration committee.

When determining these resolutions, the remuneration committee considers the long-term interests of the shareholders, investors, and all other stakeholders of BinckBank. The Executive Board chairman provides the remuneration committee with information. The committee is also informed and advised by the control committee, which includes the HR manager, the Governance, Risk & Compliance manager, and a legal expert. The remuneration committee is independent and has sufficient expertise with reference to the remuneration policy, the remuneration culture, and the circumstances and motivations that can create undesirable incentives within a company to make decisions that conflict with the conservative management of risk, capital, and liquidity.

During the year, the remuneration committee paid attention to matters such as the evaluation and remuneration of the Identified Staff and the Executive Board, the new pension system, and various issues relating to the remuneration policy. At remuneration committee meetings, the HR manager presented a report on developments at BinckBank with respect to issues such as employee satisfaction, internal and external training, recruitment and selection, and changes to the pension system and employment law.

The remuneration committee met on four occasions in 2018. The remuneration committee held one meeting in 2018 with the audit committee in the absence of the Executive Board.

80 REPORT OF THE SUPERVISORY BOARD

SUMMARY OF BINCKBANK’S REMUNERATION REPORT FOR THE 2018 FINANCIAL YEAR

General

Best practice provision 3.4.1 of the Corporate Governance Code stipulates that information must be included in the remuneration report on how the remuneration policy of the preceding year has been implemented and how the performance of the remuneration policy contributes to long-term value creation. BinckBank has a remuneration policy (BinckBank Remuneration Policy) that is based on the Restrained Remuneration Policy Regulation in the Financial Services Act 2017 (the Regulation) and the provisions under the Financial Undertakings (Remuneration Policy) Act as included in the Financial Supervision Act. The full remuneration report for the 2018 calendar year (2018 Remuneration Report) and the report on the remuneration policy for Identified Staff can be found on www.binck.com.

The BinckBank Remuneration Policy comprises the following pay components:

A) Fixed gross annual salary B) Variable remuneration C) Pension scheme and WIA insurance D) Car lease scheme and mobile telephone reimbursement

A. FIXED GROSS ANNUAL SALARY The fixed gross basic annual salary is set as follows:

V.J.J. Germyns € 629,800 E.J.M. Kooistra € 563,500 S.J. Clausing € 509,800

These amounts include pension compensation.

B. VARIABLE REMUNERATION Each year, at the end of the financial year, the remuneration committee agrees on the performance targets for the new year with the Executive Board. After the end of the year, the Supervisory Board determines whether the Executive Board can be eligible for conditional or definitive allocation of the variable remuneration and its payment over the calendar year in question.

Financial targets (50% of the total score) The following key financial targets were defined for 2018:

• Adjusted net earnings per share • Cost/income ratio

A total of 87.5% of the financial targets were met.

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Qualitative and quantitative (non-financial) targets (50% of the total score) The following key non-financial targets were defined for 2018:

• Customer satisfaction • Employee satisfaction

A total of 50% of the non-financial targets were met.

Conclusion: As shown above, a total of 68.75% of the targets were met. The Supervisory Board recorded this as such and used it as the basis for calculating the performance-based remuneration. There were no grounds for differentiating between the individual executive directors.

C. PENSION SCHEME AND WGA/WIA INSURANCE Pension scheme BinckBank pays the pension contribution based on the executive director’s age to the executive director’s pension insurer for the maximum pensionable salary of € 100 thousand. The remaining contribution, for the salary in excess of € 100 thousand, is made available to the executive director as pension compensation.

WGA/WIA insurance The extended insurance under the WGA (Partial Capability for Work Act) covers up to a maximum of 70% of the salary threshold under the WIA (Work and Income (Capacity for Work) Act) (2018: € 55,927) less the benefit from the Employee Insurance Agency (UWV). The premium is 0.411%, of which BinckBank pays half. BinckBank pays 50% of the premium for WIA insurance, which entitles the insured person to receive a maximum of 70% of their last-earned salary. The premium is 2.457% of the insured sum per year. Executive directors participated in this scheme in 2018. Mr Clausing works under a ‘contract for services’ with a twelve-month notice period. Invalidity insurance has also been taken out for him for the next twelve months, in case his contract is cancelled due to occupational disability. This puts him under conditions equivalent to those applicable to the other executive directors.

D. CAR LEASE SCHEME AND MOBILE TELEPHONE REIMBURSEMENT Executive directors participate in the relevant BinckBank car lease scheme and are reimbursed for mobile telephone costs.

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Remuneration

RENUMERATION OF THE EXECUTIVE BOARD 2018 Total BinckBank Of which, Shares yet to Fixed gross Performance- remuneration Variable shareholding shares in be received annual Pension related (fixed + as % of fixed at year-end lock-up from previous salary contribution rewards 2018 variable) remuneration 2018 period financial years*

V.J.J. Germyns € 629,800 € 14,049 € 86,598 € 730,447 13,8% 119,120 16,831 7,773

E.J.M. Kooistra € 563,500 € 22,483 € 77,482 € 663,465 13,8% 142,005 19,522 6,971

S.J. Clausing € 509,800 € 13,818 € 70,098 € 593,716 13,8% 39,566 5,246 3,785

Totaal € 1,703,100 € 50,350 € 234,178 € 1,987,628 300,691 41,599 18,529

* Shares still to be received from previous financial years are subject to a re-evaluation of the performances achieved in performance year in question.

RENUMERATION OF THE EXECUTIVE BOARD 2017 Total BinckBank Of which, Shares yet to Fixed gross Performance- remuneration Variable shareholding shares in be received annual Pension related (fixed + as % of fixed at year-end lock-up from previous salary contribution rewards 2017 variable) remuneration 2017 period financial years*

V.J.J. Germyns € 629,800 € 9,927 € 38,193 € 677,920 6,1% 88,828 21,494 11,379

E.J.M. Kooistra € 563,500 € 20,327 € 34,172 € 617,999 6,1% 116,177 25,005 10,907

S.J. Clausing € 509,800 € 12,096 € 30,916 € 552,812 6,1% 23,904 2,405 2,229

Totaal € 1,703,100 € 42,350 € 103,281 € 1,848,731 228,909 48,904 24,515

* Shares still to be received from previous financial years are subject to a re-evaluation of the performances achieved in performance year in question.

OVERVIEW OF THE APPOINTMENT OF THE EXECUTIVE DIRECTORS Date of Date of (re)appointment contract expiry

V.J.J. Germyns 24-4-2018 AV 2022

E.J.M. Kooistra 25-4-2016 AV 2020

S.J. Clausing 30-10-2015 AV 2019

83 REPORT OF THE SUPERVISORY BOARD

Pay ratios

Under the Corporate Governance Code, pay ratios within the company and changes to these ratios must be reported. The ratio between the Executive Board chairman’s remuneration (highest salary) and the lowest salary on 31 December 2018 was 32.4 : 1. The ratio between the average Executive Board salary and the average Identified Staff member’s salary (excluding the Executive Board) on 31 December 2018 was 3.7 : 1. And the ratio between the average Identified Staff member’s salary (including the Executive Board) and the average salary of other employees on 31 December 2018 was 4.4 : 1. As per 31 December 2018, the ratio between average salary of the Executive Board compared to the average salary of the other employees was 10.75 : 1.

LOANS EXTENDED TO EXECUTIVE BOARD MEMBERS Executive Board members can take out securities-based loans under the conditions that apply to personnel. In 2018, none of the Executive Board members made use of this facility. No other loans were extended to executive directors.

REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD AND COMMITTEES IN 2018 The annual general meetings in 2010 and 2011 resolved to apply the following gross remuneration for members of the Supervisory Board and its committees:

ANNUAL REMUNERATION OF THE SUPERVISORY BOARD:

Chairman of the Supervisory Board € 40,000

Supervisory directors € 26,000

ANNUAL REMUNERATION FOR COMMITTEE MEMBERS:

chairman of the audit committee € 8,000

members of the audit committee € 6,000

chairman of the risk and product development committee € 8,000

members of the risk and product development committee € 6,000

chairman of the remuneration committee € 8,000

members of the remuneration committee € 6,000

The remuneration awarded to supervisory directors was in accordance with the above. The tables below show the remuneration of the Supervisory Board, the audit committee, the risk and product development committee, and the remuneration committee. An overview of the remaining terms of appointment for the individual supervisory directors is also presented.

84 REPORT OF THE SUPERVISORY BOARD

REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD 2018

Fixed Fixed Fixed Fixed renumeration renumeration renumeration renumeration member SB member AC member RPC member RemCo Total

J.W.T. van der Steen € 40,000 € 6,000 - € 6,000 € 52,000

C.J. van der Weerdt-Norder € 26,000 € 8,000 € 6,000 - € 40,000

J.M.A. Kemna € 26,000 - € 6,000 € 8,000 € 40,000

M. Pijnenborg € 26,000 - € 6,000 € 6,000 € 38,000

J.G. Princen € 8,667 € 2,000 - € 2,000 € 12,677

A. Soederhuizen € 26,000 € 6,000 € 8,000 - € 40,000

Total € 152,667 € 22,000 € 26,000 € 22,000 € 222,667

REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD 2017

Fixed Fixed Fixed Fixed renumeration renumeration renumeration renumeration member SB member AC member RPC member RemCo Total

J.W.T. van der Steen € 40,000 € 6,000 - € 6,000 € 52,000

C.J. van der Weerdt-Norder € 26,000 € 8,000 € 6,000 - € 40,000

L. Deuzeman € 8,233 € 1,900 € 2,533 - € 12,666

J.M.A. Kemna € 26,000 - € 6,000 € 8,000 € 40,000

M. Pijnenborg € 19,500 - € 4,500 € 4,500 € 28,500

A. Soederhuizen € 26,000 € 4,500 € 7,500 € 1,500 € 39,500

Total € 145,733 € 20,400 € 26,533 € 20,000 € 212,666

OVERVIEW OF TERMS OF APPOINTMENT OF MEMBERS OF THE SUPERVISORY BOARD: Date of (re)appointment Date of contract expiry

J.W.T. van der Steen 24-4-2018 AV 2022

C.J. van der Weerdt-Norder 24-4-2018 AV 2022

J.M.A. Kemna 24-4-2018 AV 2022

M. Pijnenborg 24-4-2017 AV 2021

J.G. Princen 30-8-2018 AV 2022

A. Soederhuizen 30-10-2015 AV 2019

85 REPORT OF THE SUPERVISORY BOARD

FINANCIAL STATEMENTS AND DIVIDEND

The Supervisory Board discussed the 2018 financial statements with the Executive Board and Deloitte Accountants B.V. (the external auditor) and approved the financial statements during the meeting of 11 March 2019. Deloitte Accountants B.V. issued an unqualified audit opinion. The financial statements will be submitted to the General Meeting for adoption on 23 April 2019. The offer price of the public offer of Saxo Bank has taken account of dividends (cum-dividend). For that reason, the Stichting Prioriteit has determined in accordance with article 32, paragraph 3 of the articles of association that the entire 2018 result, after deduction of the distributed interim dividend, will be added to the reserves. As a result, no final dividend will be paid for 2018.

The Supervisory Board

J.W.T. van der Steen (chairman) Ms C.J. van der Weerdt-Norder (vice-chairman) Ms J.M.A. Kemna Ms M. Pijnenborg J.G. Princen A. Soederhuizen

86 PERSONAL DETAILS OF THE BOARD MEMBERS PERSONAL DETAILS OF THE BOARD MEMBERS

Members of the Executive Board

Chairman of the Executive Board VINCENT GERMYNS – 1973 – BELGIAN NATIONALITY

Vincent has been chairman of the Executive Board of BinckBank since 2015. During the general meeting of 23 april 2018 Vincent was reappointed as chairman of the Executive Board. In his role as chairman of the Executive Board Vincent concentrates first and foremost on the pursuit of the strategy and growth in turnover. During his career at BinckBank Vincent has headed BinckBank’s international expansion. He was responsible for the start-up of the Belgian branch and for the management of all branches abroad. Vincent’s education included studies at the Royal Military Academy (Brussels, Belgium) and the KU Leuven (Belgium). Earlier on in his career he worked at KBC Asset Management in Belgium.

Member of the Executive Board, chief financial & risk officer EVERT-JAN KOOISTRA – 1968 – DUTCH NATIONALITY

Evert-Jan has been a member of the Board of BinckBank and chief financial and risk officer (CFRO) since 2008. Evert-Jan was reappointed by the Supervisory Board during the general meeting of 25 April 2016. He is responsible for finance & control, governance, risk, compliance and treasury & ALM. Evert-Jan studied Business Economics at the Erasmus University in Rotterdam and is a chartered accountant. He has a twenty five year track record in the financial sector, at companies including PricewaterhouseCoopers and Shell. His most recent position was as financial director of the American International Game Technology.

Member of the Executive Board, chief operating officer STEVEN CLAUSING – 1971 – DUTCH NATIONALITY

Steven was appointed director (chief operating officer) of BinckBank at the extraordinary general meeting of 30 October 2015. Steven is a Technical Industrial Engineer (TU Eindhoven) and also holds a Master’s degree in Finance (TIAS business school, Tilburg) and an Executive Master’s in Internal Auditing (Erasmus University, Rotterdam). Steven began his education and career in the Royal Dutch Navy and was primarily involved in improving operations. He joined ABN AMRO Bank in 1998, where he held both commercial and internally focussed positions. In 2008 he took up a position at RBS, where he moved in 2011 from the position of head of Internal Audit of the business unit ‘international payments’ to Risk Management. In that post he focused chiefly on the assessment of worldwide transition management. He joined BinckBank as head of Risk Management in March 2013. In that position he played a prominent role in various sub-committees of the Executive Board and the Supervisory Board. In his role as COO, Steven has product development, user experience, data & analytics, investement management, operations and ICT as primary focus areas.

88 PERSONAL DETAILS OF THE BOARD MEMBERS

Members of the Supervisory Board

JOHN VAN DER STEEN 1954 – Dutch nationality

Mr J.W.T. van der Steen was appointed as a member of the Supervisory Board at the annual general meeting on 24 April 2018 for a term of four years. Mr Van der Steen is Chairman of the Supervisory Board and member of the remuneration committee and audit committee. Until 2010 he was also a supervisory director of Aon Switzerland (as chairman), Germany, Norway and Belgium. Mr Van der Steen is connected to RAI Holding B.V. as a member and deputy chairman of the Supervisory Board and as chairman of the Audit Committee. At the beginning of 2015, Mr Van der Steen was appointed as chairman of the Supervisory Board of Princess Sportsgear & Traveller B.V. At the end of 2016 he was appointed executive director of Stadhold Insurances Luxembourg S.A.

Number of BinckBank shares held on 31 December 2018: 0

CARLA VAN DER WEERDT-NORDER 1964 – Dutch nationality

Ms C.J. van der Weerdt-Norder was appointed as a member of the Supervisory Board at the annual general meeting on 24 April 2018 for a term of four years. Ms Van der Weerdt-Norder is chairwoman of the audit committee and a member of the risk and product development committee. Ms Van de Weerdt-Norder is a business administrator and registered accountant. Ms Van der Weerdt-Norder is a supervisory director and chairwoman of the Audit & Risk Committee for Triodos Bank N.V. She is also a member of the Supervisory Board of DWS Zorgverzekeraar, Habion and Hogeschool InHolland. Ms Van der Weerdt-Norder is also a member of the Advisory Board at the District Court of Gelderland.

Number of BinckBank shares held on 31 December 2018: 0

HANNY KEMNA 1960 – Dutch nationality

Ms J.M.A. Kemna was reappointed as a member of the Supervisory Board at the annual general meeting on 24 April 2018 for a term of four years. Ms Kemna is chairwoman of the remuneration committee and a member of the risk and product development committee. Ms Kemna is affiliated with cooperative Menzis N.V. as vice chairman of the Supervisory Board and chairwoman of the Governance, Risk and Compliance committee. Since 1 January 2016, she has served as a Supervisory Board member of pension administrator MN Services N.V. Furthermore she is a member of the Supervisory Board of SVn and external member of the audit committees of the Ministry of Security & Justice and the Ministry of Finance.

Number of BinckBank shares held on 31 December 2018: 0

89 PERSONAL DETAILS OF THE BOARD MEMBERS

MARIJN PIJNENBORG 1970 – Dutch nationality

Ms M. Pijnenborg was appointed as a member of the Supervisory Board at annual general meeting on 24 April 2017 for a period of four years. Ms Pijnenborg is a member of the remuneration committee and the risk and product committee. Ms Pijnenborg is an entrepreneur and investor specialising in online services. She was associated with iens.nl as a member of the Supervisory Board, where she supervised the merger between IENS and Seatme. Ms Pijnenborg is also an investor and founder of Boralis B.V. and (co-) founder of the renowned portals auto.nl and Funda. Ms Pijnenborg carries out activities for MK24, as a board member. MK24 provides arts education in Amsterdam in the field of visual arts and multimedia by offering education and courses.

Number of BinckBank shares held on 31 December 2018: 0

JEROEN PRINCEN 1965 – Dutch nationality

Mr J.G. Princen was appointed as a Supervisory Director at the extraordinary general meeting on 30 August 2018 for a term of four years. Mr Princen is lawyer and partner at DVDW in Rotterdam and the Hague. In the period 1995 until 2007 he was a partner at the lawyer firm Ploum Lodder Princen in Rotterdam and was during approximately 10 years member of the firm’s board. Mr Princen also develops activities as supervisor in the art and cultural sector. Mr Princen is member of the Board of the Boijmans van Beuningen Foundation, member of the Supervisory Board and Audit Committee of Witte de With Institute for Contemporary Art and member of the Supervisory Board and Audit Committee of Stedelijk Museum in Schiedam.

Number of BinckBank shares held on 31 December 2018: 0

ARJEN SOEDERHUIZEN 1965 – Dutch nationality

Mr A. Soederhuizen was appointed as a member of the Supervisory Board at the extraordinary general meeting on 30 October 2015 for a term of four years. Mr Soederhuizen is chairman of the risk and product development committee and a member of the audit committee. From 1991 to 2008, Mr Soederhuizen was employed at ABN AMRO Bank, the last four years of which as Chairman of the Board of ABN AMRO Asset Management Nederland B.V. From 2009 to 2016, Mr Soederhuizen worked as an interim manager at various clients, including PGGM Vermogens beheer and ABN AMRO Pensioenfonds. Since July 2016, Mr Soederhuizen has been a member of the Advisory Board of Amundi Asset Management Netherlands and since April 2018 he has been appointed as member of the board of the Pensioenfonds voor de Architectenbureaus.

Number of BinckBank shares held on 31 December 2018: 0

90 FINANCIAL STATEMENTS 2018 FINANCIAL STATEMENTS

This document is a translation of the Dutch original and is provided as a courtesy only. In the event of any disparity, the Dutch version shall prevail. No rights may be derived from the translated document.

92 TABLE OF CONTENTS FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS 94 Consolidated statement of financial position 95 Consolidated income statement 96 Consolidated statement of comprehensive income 97 Consolidated statement of cash flows 98 Consolidated statement of changes in equity 100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 101

NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 121

NOTES TO THE CONSOLIDATED INCOME STATEMENT 139

OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 147

COMPANY FINANCIAL STATEMENTS 191 Company balance sheet 192 Compant income statement 193

NOTES TO THE COMPANY FINANCIAL STATEMENTS 194

NOTES TO THE COMPANY BALANCE SHEET 195

NOTES TO THE COMPANY INCOME STATEMENT 205

OTHER INFORMATION 213 Independent auditor’s report 213 Provisions of the Articles of Association regarding priority shares (Articles 15 and 21) 218 Provisions of the Articles of Association regarding profit appropriation (Article 32) 219

93 FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

94 FINANCIAL STATEMENTS

Consolidated statement of financial position (amounts in € 000’s) Note 2018 2017

ASSETS

Cash and balances with central banks* 5 1,096,838 1,003,537

Due from banks* 6 134,675 133,968

Derivatives* 7 24,277 37,311

Financial assets at fair value through profit or loss 8 13,721 16,613

Investments at amortised cost* 9 1,033,590 -

Available-for-sale financial assets* 10 - 797,294

Held-to-maturity financial assets* 11 - 342,190

Loans and receivables* 12 1,409,649 1,303,297

Investments in associates 13 - 485

Intangible assets 14 157,214 157,950

Property, plant and equipment 15 32,006 33,969

Current tax assets 16 16,622 16,725

Deferred tax assets 17 468 6,279

Other assets 18 138,526 58,754

Prepayments and accrued income* 19 13,407 15,446

Total assets 4,070,993 3,923,818

LIABILITIES

Due to banks 6 5,274 2,538

Derivatives* 7 26,759 37,055

Financial liabilities at fair value through profit or loss 8 161 231

Funds entrusted* 20 3,562,200 3,383,507

Provisions 21 3,394 8,134

Current tax liabilities 16 12 10

Deferred tax liabilities 17 29,996 36,443

Other liabilities 22 28,040 52,084

Accrued liabilities* 23 11,773 8,927

Total liabilities 3,667,609 3,528,929

Equity attributable to:

Owners of the parent 24 403,384 393,956

Non-controlling interests 24 - 933

Total equity 403,384 394,889

Total equity and liabilities 4,070,993 3,923,818

* Includes change in presentation, see note 2.5

95 FINANCIAL STATEMENTS

Consolidated income statement (amounts in € 000’s) Note 2018 2017

INCOME

Interest income 41,241 36,439

Interest expense (9,171) (6,400)

Net interest income 25 32,070 30,039

Fee and commission income 119,593 124,839

Fee and commission expense (16,618) (18,981)

Net fee and commission income 26 102,975 105,858

Result from financial instruments 27 7,013 6,150

Credit losses from financial assets 28 (207) (92)

Other operating income 29 943 7,014

Total income from operating activities 142,794 148,969

EXPENSES

Employee expenses 30 48,905 53,048

Depreciation and amortisation 31 5,118 26,792

Other operating expenses 32 61,345 61,746

Total operating expenses 115,368 141,586

Result from operating activities 27,426 7,383

Share of results in associates 33 8,436 864

Results before tax 35,862 8,247

Income tax expense 16 (400) 274

Net result 35,462 8,521

Net result attributable to:

Owners of the parent 35,180 8,971

Non-controlling interests 282 (450)

Net result 35,462 8,521

Basic and diluted earnings per share (in €) 34 0.53 0.13

96 FINANCIAL STATEMENTS

Consolidated statement of comprehensive income (amounts in € 000’s) Note 2018 2017

Net result 35,462 8,521

Other comprehensive income

Net (loss)/gain on available-for-sale financial assets 24 - (645)

Income tax relating to components of other 24 - 116 comprehensive income

Other comprehensive income, net of tax - (529)

Total comprehensive income, net of tax 35,462 7,992

BinckBank N.V. has no other comprehensive income that will not be recognised through profit and loss on realisation.

Result attributable to:

Owners of the parent 35,180 8,442

Non-controlling interests 24 282 (450)

Total realised and unrealised income, net of tax 35,462 7,992

97 FINANCIAL STATEMENTS

Consolidated statement of cash flows (amounts in € 000’s) Note 2018 2017

CASH FLOW FROM OPERATING ACTIVITIES

Net result for the year 35,462 8,521

Adjustments for:

Amortisation of intangible assets 14,15 5,118 26,792

Provisions (4,740) (757)

Amortisation of premiums and discounts on:

Investments at amortised cost 9 3,280 -

Available-for-sale financial assets 10 - 21,908

Held-to-maturity financial assets 11 - 24,793

Loans and recievables 4,492 4,845

(Expected) credit losses 200 52

Movements in deferred taxes (472) (654)

Share in results of associates 13 - 1,019

Other non-cash movements (8,480) (752)

Movements in operating assets and liabillities:

Cash and banks (assets)* 8 4,112

Derivatives* 7 2,738 (291)

Financial assets at fair value through profit or loss 8 2,822 (7,901)

Investments at amortised cost* 9 101,681 -

Available-for-sale financial assets* 10 - (86,570)

Held-to-maturity financial assets* 11 - 430,456

Loans and receivables* 12 (112,388) (345,629)

Taxes, other assets and prepayments and accrued income* 16,18,19 (77,150) (263)

Banks (liabilities) 6 2,736 521

Funds entrusted* 20 178,693 74,501

Taxes, other liabilities and accruals and deferred income* 16,22,23 (21,196) 31,215

Net cash flow from operating activities 112,804 185,918

CASH FLOW FROM INVESTING ACTIVITIES

Divestment of associates en subsidiaries 7,889 3,060

Investments in associates 13 - (1,504)

Investments in intangible assets 14 (581) (8,187)

Divestment of intangible assets 14 - 123

Investments in property, plant and equipment 15 (1,838) (3,818)

Divestment of property, plant and equipment 15 - 1,093

Net cash flow from investing activities 5,470 (9,233) * Includes change in presentation, see note 2.5

98 FINANCIAL STATEMENTS

Consolidated statement of cash flows (continued) (amounts in € 000’s) Note 2018 2017

CASH FLOW FROM FINANCING ACTIVITIES

Treasury shares purchased 24 - -

Dividends paid:

Final dividend for preceding year 35 (15,356) (12,679)

Interim dividend for the current year 35 (8,680) (2,002)

Net cash flow from financing activities (24,036) (14,681)

Net cash flow 94,238 162,004

Opening balance of cash and cash equivalents 1,137,641 977,853

Net cash flow 94,238 162,004

Effect of exchange rates on cash an cash equivalents 78 (2,216)

Closing balance of cash and cash equivalents 1,231,957 1,137,641

The cash and cash equivalents presented in the consolidated cash flow statement are included in the consolidated balance sheet under the following headings at the amounts stated below:

Cash and balances with central banks 5 1,096,838 1,003,537

Due from banks – cash equivalents 6 134,675 133,968

Due from banks – non cash equivalents 6 444 136

Total cash equivalents 1,231,957 1,137,641

Cash flow from operating activities includes the following items:

Tax paid (297) (4,181)

Interest received 43,640 39,948

Interest paid (8,812) (6,478)

Commission received 120,896 124,775

Commission paid (16,486) (19,633)

99 FINANCIAL STATEMENTS

Consolidated statement of changes in equity

Issued Share Fair Non- share premium Treasury value Retained controlling Total (amounts in € 000’s) Note capital reserve shares reserve earnings interests equity

31 December 2017 6,750 343,565 (4,282) 492 47,431 933 394,889

IFRS 9 transtition adjustment - - - (492) (1,440) - (1,932)

1 January 2018 6,750 343,565 (4,282) - 45,991 933 392,957

Net result for the year - - - - 35,180 282 35,462

Other comprehensive ------income Total comprehensive - - - - 35,180 282 35,462 income

Final dividend 2017 35 - - - - (15,356) - (15,356)

Interim dividend 2018 35 - - - - (8,680) - (8,680)

Grant of rights to shares 25 - - - - 216 - 216

Issue of shares to executive 25 - - 201 - (201) - - board and employees

Capital movement 25 - - - - - (1,215) (1,215) non-controlling interests

31 December 2018 6,750 343,565 (4,081) - 57,150 - 403,384

Issued Share Fair Non- share premium Treasury value Retained controlling Total (amounts in € 000’s) Note capital reserve shares reserve earnings interests equity

1 January 2017 7,100 361,379 (29,468) 1,021 55,537 1,383 396,952

Net result for the year - - - - 8,971 (450) 8,521

Other comprehensive - - - (529) - - (529) income Total comprehensive - - - (529) 8,971 (450) 7,992 income

Final dividend 2016 35 - - - - (12,679) - (12,679)

Interim dividend 2017 35 - - - - (2,002) - (2,002)

Grant of rights to shares 24 - - - - 92 - 92

Issue of shares to executive 24 - - 318 (318) board and employees

Issue of shares to third 24 - - 5,340 - (806) - 4,534 parties

Cancelled treasury shares 24 (350) (17,814) 19,528 - (1,364) - -

31 December 2017 6,750 343,565 (4,282) 492 47,431 933 394,889

100 FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Company information

BinckBank N.V., established and registered in the Netherlands, is a public limited liability company incorporated under Dutch law, whose shares are publicly traded. BinckBank has its registered office at Barbara Strozzilaan 310, 1083 HN, Amsterdam, and is registered with the Chamber of Commerce under number 33162223. BinckBank N.V. provides online brokerage services in financial instruments for private and professional investors. In addition to its brokerage services, BinckBank N.V. offers asset management services and savings products. ‘BinckBank’ hereinafter refers to BinckBank N.V. and its various subsidiaries.

The consolidated company financial statements for BinckBank for the period ending on 31 December 2018 have been prepared by the Executive Board and approved for publication pursuant to the resolution of the Executive Board and the Supervisory Board dated 11 March 2019.

Executive Board: Supervisory Board: V.J.J. Germyns (chairman) J.W.T. van der Steen (chairman) E.J.M. Kooistra (CFRO) Ms C.J. van der Weerdt-Norder (vice-chairman) S.J. Clausing (COO) Ms J.M. Kemna Ms M. Pijnenborg J.G. Princen A. Soederhuizen

2. General accounting principles

2.1 PRESENTATION OF THE FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), hereinafter referred to as ‘IFRS-EU’.

The financial statements have been prepared on the basis of the going concern assumption. Unless otherwise stated, the consolidated financial statements are presented in euros, with all amounts rounded to the nearest thousand (€ 000’s). The figures stated in the tables are based on amounts that have not been rounded and therefore rounding differences may occur.

The presentation of the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity and notes may have been amended in order to provide better information or improve reconciliation with the current period.

2.2 ACCOUNTING PRINCIPLES USED FOR CONSOLIDATION The consolidated financial statements consist of the financial statements of BinckBank and its subsidiaries as at 31 December 2018 and during the financial year. Subsidiaries are companies of which BinckBank has a certain degree of control. BinckBank controls an investment only if:

• it has control of the investment (it has entitlements that enable it to have a direct influence on the relevant operations of the investment) • it is exposed or entitled to variable returns due to its involvement in the investment, and • it can use its control of the investment to influence the returns.

101 FINANCIAL STATEMENTS

If BinckBank does not hold a majority of the voting rights or equivalent entitlements with respect to an investment then it takes account of all the relevant facts and circumstances in order to assess whether it has control of the investment, including:

• contractual agreements with the other parties holding voting rights with respect to the investment; • entitlements arising from other contractual arrangements; and • potential voting rights

Consolidation of a subsidiary begins when BinckBank acquires control of the subsidiary and ceases when control of the subsidiary ends. BinckBank assesses whether it has control of an investment if there are indications from the facts and circumstances that one or more of the three elements of control have changed. Assets, liabilities, income and expense items of a subsidiary acquired or disposed of during the year are recognised in the financial statements from the date on which BinckBank acquires control until the date on which BinckBank ceases to have control.

Profit or loss and every component of other comprehensive income (OCI) are allocated to the shareholders of the parent company of BinckBank and the non-controlling interests, even if this leads to non-controlling interests with a negative balance. If necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of BinckBank.

Transactions between BinckBank and its subsidiaries which took place during the year have been fully eliminated in the consolidated financial statements. Unrealised gains on transactions with investments and associates have been eliminated in proportion to BinckBank’s interests in the company. Unrealised losses are also eliminated, except where the transactions indicate that the transferred asset has become impaired.

2.3 FOREIGN CURRENCY TRANSLATION The consolidated financial statements are denominated in euros, this being BinckBank’s functional and reporting currency. Items recognised in the financial statements of each entity are measured on the basis of the functional currency of the relevant group entity. Initial recognition of transactions in foreign currencies takes place at the functional currency’s exchange rate on the transaction date.

Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing on balance sheet date. Differences relating to movements in exchange rates are recognised in the income statement. Non- monetary items in foreign currencies measured at fair value are translated at the exchange rate at the time the fair value is determined. Currency translation differences on non-monetary items carried at fair value through profit and loss are likewise recognised in the income statement. The results of financial transactions and costs are translated into euros in the income statement at the exchange rate prevailing on the transaction date.

2.4 STATEMENT OF CASH FLOWS The statement of cash flows has been prepared using the indirect method, in which cash flows are analysed according to operating, investing and financing activities. In the cash flow from operating activities, the net result is adjusted for income and expenses that have not resulted in receipts and expenditures in the same financial year and for changes in provisions and accrued items. Cash includes the cash in hand together with freely available balances on deposit at central banks and other financial instruments with maturities of less than three months from acquisition date. Cash flows in foreign currency are translated into the functional currency at the exchange rate prevailing on the date the cash flow occurs.

2.5 CHANGES IN ACCOUNTING PRINCIPLES The accounting principles with regard to recognition and measurement are consistent with those applied in the previous year, with the exception of the volantary change in the presentation of the accrued interest in the statement of financial position and the presentation of movements in the investment portfolio within the statement of cash flows. Furthermore, any changes as a result of the implications of new, amended or improved IFRS standards as described below or as a result of new activities.

In the current year, BinckBank has applied the new or amended IFRS standards and IFRIC interpretations effective for financial years beginning on or after 1 January 2018. New or amended standards take effect for annual periods beginning on or after the date as stated by IFRS and after ratification by the EU, whereby earlier application is permitted in some cases. The new standards and amendments to standards that took effect in the current financial year have been incorporated in the existing reporting principles. BinckBank has implemented a voluntary change in the presentation of accrued interest as from 1 January 2018. Further details are also given below on the implementation of IFRS 9 – Financial Instruments, and IFRS 15 – Revenue from Contracts with Customers on 1 January 2018.

102 FINANCIAL STATEMENTS

VOLUNTARY CHANGE IN PRESENTATION OF ACCRUED INTEREST BinckBank has implemented a voluntary change in the presentation of accrued interest as from 1 January 2018, and has adjusted the comparative figures. The accrued interest on financial instruments is now accounted for as part of the carrying amount of the instrument to which it relates and not as part of the accrued income or accrued liabilties. This improves the insight into the actual value of the financial instrument. In addition, this change ensures a better reconciliation to the classification in the supervisory reports. This adjustment has no effect on BinckBank’s profit and loss account or equity.

IFRS 9 FINANCIAL INSTRUMENTS BinckBank has applied IFRS 9 – Financial Instruments since 1 January 2018. The transition to this standard has had an impact on the accounting principles and on the financial position and results of BinckBank. These impacts are due to the classification of the financial instruments together with the provisions for expected credit loss pursuant to IFRS 9. BinckBank has not adjusted the comparative figures, in accordance with the transition options offered by IFRS 9. All changes have been recognised in the opening statement of financial position of 2018, whereby the effect of the transition is recognised in equity. BinckBank has also elected to keep hedge accounting in line with IAS 39, as is permitted by IFRS 9.

IFRS 9 classifies financial instruments into three measurement categories:

• Financial instruments at amortised cost • Financial instruments at fair value through profit and loss (FVTPL) • Financial instruments at fair value through other comprehensive income (FVOCI)

Fundamentally, the classification of financial assets under IFRS 9 depends on two criteria: the contractual cash flow of the instrument and the entity’s business model for managing its financial instruments. An entity can classify an instrument at amortised cost if contractual cash flows are solely payments of principal and interest and if the business model is to hold instruments to collect contractual cash flows (business model test). If an instrument fails to meet both criteria, then the financial asset should be measured at fair value.

As a result of the classification requirements under IFRS 9, the only adjustment for BinckBank is that the entire investment portfolio is now classified as financial assets at amortised cost. The financial assets classified as available-for-sale under IAS 39 are measured at amortised cost as from 1 January 2018 onwards. The adjustment by classification and measurement under IFRS 9 results in a reduction of the carrying value of the investment portfolio as at 1 January 2018 by € 0.7 million, being the revaluation of the portfolio of available-for-sale financial assets as at 31 December 2017. The effect on shareholders’ equity, taking into account the tax effects, is € 0.5 million.

Under IFRS 9, financial assets previously classified as available-for-sale financial assets have been reclassified as financial instruments measured at amortised cost. As a result, the fair value reserve presented under equity is no longer applicable. The following table presents the effect of the reclassification as it would have been if the portfolio, taking account of movements in the portfolio, had still been measured at fair value under the IAS 39 principles at 31 December 2018:

Available-for-sale financial assets (IAS 39) 31-12-2018

Fair value 567,592

Fair value reserve (equity) (612)

Change in fair value reserve (through equity) (1,104)

In addition, IFRS 9 requires a provision for expected credit loss to be raised on the basis of an ‘expected credit loss model’ for financial assets measured at amortised cost and financial instruments measured at fair value (FVOCI). More information about the accounting principles and assumptions regarding the expected credit loss models is shown in note 3, Significant accounting judgements and estimates, note 4.2 Financial assets and liabilities, and note 41.5, Credit risks. The initial accounting entries of the adjustments made as a consequence of IFRS 9 on 1 January 2018, were recognised directly in equity on 1 January 2018, in accordance with the IFRS 9 implementation guidance. The expected credit loss model under IFRS 9 is based on various credit quality stages. More information about the credit loss model is shown in note 4.2, Financial assets and liabilities.

103 FINANCIAL STATEMENTS

The following table presents a reconciliation of the impairments of the financial instruments measured at amortised cost under IFRS 9 and as recognised under IAS 39 on 1 January 2018, as compared to the expected credit loss under IFRS 9: Change Provision Impairments Reclassification expected credit expected credit (IAS 39) under IFRS 9 loss under IFRS 9 loss (IFRS 9)

Cash and balances at central banks - - 200 200

Banks - - 100 100

Financial assets and liabilities at fair value through profit and loss N/A - 277 277

Available-for-sale financial assets - - N/A N/A

Held-to-maturity financial assets - - N/A N/A

Loans and receivables 671 - 1,344 2,015

Total 671 - 1,921 2,591

IFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS BinckBank has applied IFRS 15 – Revenue from Contracts with Customers as from 1 January 2018. This standard has, in particular, an impact on the timing of the recognition of revenue. BinckBank must work through the following five steps in order to apply the basic principle of IFRS 15:

• identify the contract(s) with a customer; • identify the performance obligations in the contract; • determine the transaction price; • allocate the transaction price to the performance obligations in the contract; and • recognise revenue when (or as) the entity satisfies a performance obligation.

BinckBank has applied the transition to IFRS 15 on the basis of the modified retrospective approach, whereby only the contracts that continue after IFRS 15 is effective have been assessed and comparative figures have not been adjusted. The different identified unequivocal groups of contracts and services were assessed on the basis of the step-by-step plan. The services that lead to commission income on securities transactions have a short performance period and are recognised at the moment of settlement of the transactions. The services that lead to fees for asset management and other services are charged retrospectively over the period to which the service relates. The application of these steps did not lead to a difference in the recognition of revenue. Consequently, although the application of the new standard is based on a different concept, this has not had an impact on the financial statements of BinckBank as compared to the previous standards.

CONSOLIDATED STATEMENT OF CASH FLOWS BinckBank has implemented a voluntary change in the presentation of the consolidated statement of cash flows as from 1 January 2018, and has adjusted the comparative figures. The cash flows relating to investments and divestments in the financial assets are now recognised as components of the cash flow from operating activities. This presentation is more in line with the operating activities of a financial institution where holding investments is part of the business model. This adjustment only has an effect on the presentation of the consolidated statement of cash flows of BinckBank.

104 FINANCIAL STATEMENTS

IMPACT OF THE APPLICATION OF NEW ACCOUNTING PRINCIPLES ON THE CLOSING AND OPENING STATEMENT OF FINANCIAL POSITION 31 December 2017 1 January 2018 Closing Opening balance Change in Closing IFRS 9 IFRS 9 balance before presentation balance after Classification expected after change in accrued change in and credit loss change in (amounts in € 000’s) principles interest presentation measurement model principles

ASSETS Cash and balances at central banks 1,003,673 (136) 1,003,537 - (200) 1,003,337

Banks 133,968 - 133,968 - (100) 133,868

Derivatives 37,418 (107) 37,311 - - 37,311

Financial assets at fair value through 16,613 - 16,613 - - 16,613 profit and loss

Investments at amortised cost - - - 1,138,828 (277) 1,138,551

Available-for-sale financial assets 787,743 9,551 797,294 (797,294) - -

Held-to-maturity financial assets 340,179 2,011 342,190 (342,190) - -

Loans and receivables 1,297,830 5,467 1,303,297 - (1,344) 1,301,953

Associates 485 - 485 - - 485

Intangible assets 157,950 - 157,950 - - 157,950

Property, plant and equipment 33,969 - 33,969 - - 33,969

Current tax assets 16,725 - 16,725 - 481 17,206

Deferred tax assets 6,279 - 6,279 - - 6,279

Other assets 58,754 - 58,754 - - 58,754

Prepayments and accrued income 32,475 (17,029) 15,446 - - 15,446

Total assets 3,924,061 (243) 3,923,818 (656) (1,440) 3,921,722

LIABILITIES Banks 2,538 - 2,538 - - 2,538

Derivatives 37,055 - 37,055 - - 37,055

Financial liabilities at fair value through 231 - 231 - - 231 profit and loss

Funds entrusted 3,383,383 124 3,383,507 - - 3,383,507

Provisions 8,134 - 8,134 - - 8,134

Current tax liabilities 10 - 10 - - 10

Deferred tax liabilities 36,443 - 36,443 (164) - 36,279

Other liabilities 52,084 - 52,084 - - 52,084

Accruals and deferred income 9,294 (367) 8,927 - - 8,927

Total liabilities 3,529,172 (243) 3,528,929 (164) - 3,528,765

Equity attributable to:

Owners of the parent 393,956 - 393,956 (492) (1,440) 392,024

Non-controlling interests 933 - 933 - - 933

Total equity 394,889 - 394,889 (492) (1,440) 392,957

Total equity and liabilities 3,924,061 (243) 3,923,818 (656) (1,440) 3,921,722

105 FINANCIAL STATEMENTS

New standards, amendments of standards and interpretations, that have not yet taken effect or have not yet been ratified by the European Union are listed below. These standards have not yet been applied by BinckBank:

NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2019

IFRIC 23 – Incorporation of income tax This interpretation provides clarification of the processing and explanation of the effects uncertainty of uncertainties in accounting for income tax. The standard requires a new analysis of the determination of the tax positions. The influence of the interpretation on the financial position and results of BinckBank is not significant.

IFRS 9 – Prepayment features with This amendment clarifies the application of IFRS 9 for prepayment features with negative negative compensation (Amendment) compensation in relation to the ‘Solely Payments of Principal and Interest’ (SPPI) test. In specific transactions containing prepayment features the asset can, nevertheless, pass the SPPI test and be measured at amortised cost. Given the specific assets involved, this amendment has no significant impact on the financial position and results of BinckBank.

IFRS 16 – Leases This new standard describes the treatment of financial and operating lease contracts. Under the new standard, an asset must be recognised in the statement of financial position, for both types of lease. A financial obligation also has to be recognised when payments are spread across multiple periods. BinckBank has several lease contracts for the operational activities, rental premises and leased cars. As a result, the statement of financial position total will increase for the lease commitments arising from these contracts. BinckBank has elected the following options for the transition involved in the initial application of IFRS 16:

• IFRS 16 will be applied retrospectively, whereby the comparative figures will not be adjusted but the impact will be recognised as an adjustment in the opening balance of equity; • the discounted value of the lease commitment will be determined on the basis of the marginal interest rate at the time of the transition, in which the value of the lease asset will be set to the net present value of the lease commitment. This will have no financial impact on the opening balance of equity. • Leases with a term of 12 months or less and leases of low value assets will not be recognised under assets and liabilities, but will be recognised as lease expenses in the income statement.

Due to the transition to IFRS 16, BinckBank’s consolidated statement of financialposition total will increase by € 6 million as of 1 January 2019. In the assessment a significant assumption is the expected term of the lease. If the transaction with Saxo Bank will be completed, this might effect the expectation of the lease term and subsequently the amount of the asset and lease liabillity that will be recognised. The effect of the transition to IFRS 16 on equity will be nil and the comparative results will not be adjusted due to the transition options presented above. However, following the application of IFRS 16 the lease expenses will in general be reported slightly earlier in future periods, as the interest charges on the leases will be decrease over time. In addition, lease expenses will be recognised as interest expenses and depreciation, and no longer as a lease amount under other operating expenses.

IAS 19 – Plan amendment, curtailment The amendments to IAS 19 Employee Benefits address the accounting when a plan or settlement amendment, curtailment or settlement occurs during a reporting period. The amendment relates to pensions included in defined benefit plans. Because BinckBank does not offer such a plan, this amendment has no impact on the financial position and results of BinckBank.

IAS 28 – Long-term Interests in This amendment clarifies that recognition based on IFRS 9 should be applied for a long- Associates and Joint Ventures term interest in an associate or joint venture that is not recognised according to the equity (Amendment) method, and not IAS 28. As BinckBank has no interests in associates or joint ventures at the end of 2018, this amendment is not applicable to BinckBank.

Annual improvements cycle 2015-2017 This relates to a number of minor amendments to existing standards that clarify application of IFRS. These have no significant impact on BinckBank.

106 FINANCIAL STATEMENTS

NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2020

Conceptual framework – amendments The IASB has published an amended comprehensive conceptual framework. The conceptual in references to conceptual framework framework is the basis for definitions, recognition and measurement, presentation, and disclosures. The amendment is not so much a new framework, but rather a supplement with details on new subjects or additions and adjustments of evident shortcomings in the existing framework. These adjustments and the impact on the financial position and results of BinckBank are still to be assessed.

NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2021

IFRS 17 – Insurance contracts This new standard is applicable to organisations that issue insurance contracts and describes the bases for recognition, measurement and presentation of, in particular, insurance liabilities. As BinckBank does not issue insurance contracts, this standard is not expected to have any impact on BinckBank.

NEW OR AMENDED STANDARDS OF WHICH THE EFFECTIVE DATE HAS BEEN SUSPENDED INDEFINITELY

IFRS 10 en IAS 28 – Amendment This amendment relates to the timing and extent of gain or loss recognition for transactions of standards to remove conflicting with an associate or joint venture. This amendment has no effect on the financial position requirements and results of BinckBank. In connection with an investigation of the equity method, the IASB has suspended the effective date of this adjustment indefinitely.

107 FINANCIAL STATEMENTS

3. Significant accounting judgements and estimates

The preparation of the financial statements involves estimates and assumptions based on subjective presumptions. Situations are assessed on the basis of available financial data and information. These estimates may have a material impact on the amount of the reported assets and liabilities and the contingent assets and liabilities on the date of the consolidated financial statements and the income and expenses reported for the period under review. While management strives to make these estimates to the best of its ability, actual results may vary from these estimates.

The estimates and underlying assumptions are reviewed regularly. Revisions are recognised in the period in which the estimate is revised, or in the period of revision and future periods, if the revision affects both the current and future reporting periods. The most significant assumptions for the future and other key sources of estimation uncertainty at balance sheet date that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are:

GOING CONCERN Management of BinckBank has assessed the bank’s ability to operate as a going concern is satisfied that the bank has adequate resources to continue its activities in the foreseeable future. Moreover, the management is not aware of any material uncertainties that may cast doubt on BinckBank’s ability to continue as a going concern. For this reason, the financial statements have been prepared in accordance with the continuity principle.

CONSOLIDATION OF ASSOCIATES AND JOINT VENTURES The consolidated financial statements are prepared on the basis of the consolidation of BinckBank and its associates and joint ventures. In determining whether associates and joint ventures should be consolidated, management has assessed whether there is de facto control as a result of decisive control, risk and reward regarding the variable results of the entity or influence over the appropriation of the results of the entity on the basis of current circumstances and insights, consistent with the conditions of IFRS 10.

FAIR VALUE OF FINANCIAL INSTRUMENTS Where the fair value of financial assets and financial liabilities cannot be obtained from active markets, they are determined using valuation methods, including cash flow models or other valuation models. Observable market data is used as the input for these models whenever possible, but when this is not possible assessments are required in the determination of fair values. These assessments involve a consideration of input factors such as liquidity risk, credit risk and volatility. Changes in assumptions on these factors can affect the fair value of financial instruments.

CLASSIFICATION OF FINANCIAL INSTRUMENTS BinckBank carries out a business model and SPPI test for the classification of financial assets. In its business model test, BinckBank assesses how each group of financial instruments is managed, the objective of holding the instruments and the risks associated with holding financial instruments. This assessment involves a degree of estimation that is periodically reconsidered and which may result in adjustments to the classification of the financial instruments.

EXPECTED CREDIT LOSS ON FINANCIAL INSTRUMENTS AT AMORTISED COST IFRS requires the recognition of an expected credit loss provison for financial assets measured at amortised cost. The determination of the expected credit loss on financial assets measured at amortised cost requires the use of models and assumptions such as on credit behaviour and future economic developments. A provision is formed for expected credit loss on these assets when it is expected that BinckBank will not be able to collect all amounts that it should have been received under the original contractual conditions of the loan. To this end BinckBank makes estimates of the realisable value, being the value of future cash flows and the costs necessary to collect the amounts receivable.

As BinckBank has limited historical information available for some groups of financial instruments, such as mortgage receivables, the parameters of the credit loss model for these instruments are determined on the basis of the available public information that is regarded as being representative for the portfolios held by BinckBank. The provision for expected credit loss is then equal to the difference between the carrying value and the realisable value.

108 FINANCIAL STATEMENTS

The most significant assumptions and assessments are:

• Definition of a homogeneous group of financial assets with similar characteristics for the assessment of expected credit loss on a collective basis • Definition of a significant deterioration of credit risk; • Assumptions in the credit loss model for probability of default (PDs), loss given default (LGD) including cure rates and estimates of cash flows from the liquidation of collateral, allocation of the expected cash flows and future macro- economic factors.

More information about the models used and assumptions regarding the expected credit loss models is enclosed in note 4.2, Financial assets and liabilities.

IMPAIRMENT OF GOODWILL BinckBank performs an impairment test on the carrying amount of goodwill at least once a year. This involves estimating the value in use of the cash flow generating units to which the goodwill is attributed. BinckBank estimates the value in use by estimating the expected future cash flows from the cash flow generating unit and determining an appropriate discount rate for the calculation of the net present value of those cash flows.

FAIR VALUE OF IDENTIFIED INTANGIBLE ASSETS ACQUIRED THROUGH ACQUISITIONS BinckBank measures the value of the identifiable intangible assets acquired through the acquisition of a company or business activities. The measurement is performed using cash flow models and/or royalty models. BinckBank makes assumptions and projections of future revenues and results to determine the cash flows and applicable discount rate. Where the royalty method is used, an estimate is also made of the appropriate royalty percentage. At each balance sheet date the intangible assets are evaluated for any indication of impairment.

ECONOMIC LIFE OF INTANGIBLE ASSETS AND PROPERTY, PLANT, AND EQUIPMENT BinckBank applies standard amortisation and depreciation periods for various groups of assets. BinckBank assesses each asset periodically to establish whether the standard amortisation or depreciation period still corresponds to the expected useful life of the asset. Circumstances may arise during the use of the asset that may result in a situation in which the standard depreciation period no longer corresponds to the actual useful life. As soon as a deviation is identified, the remaining carrying amount of the asset is written off over the revised remaining economic life on a straight-line basis.

DEFERRED TAX ASSETS Deferred tax assets are recognised if it is probable that future taxable profits will be generated which allow the deferred tax to be recovered.

PROVISIONS AND OFF-BALANCE SHEET LIABILITIES Provisions and off-balance sheet liabilities are determined based on available information and management estimates. The actual results may differ from these estimates.

109 FINANCIAL STATEMENTS

4. Accounting policies

4.1 GENERAL The consolidated financial statements have been prepared on the basis of historical cost, apart from the derivatives and financial assets and liabilities recognised at fair value through profit and loss, which are recognised at fair value.

Income and expense items are recognised in the period to which they relate, with due regard for the accounting principles. Revenues are recognised when it is probable that their economic benefits will flow to BinckBank and the revenue can be reliably measured.

4.2 FINANCIAL ASSETS AND LIABILITIES Transactions in financial assets and liabilities conforming to standard market conditions are recognised in the accounts on the transaction date. Other financial assets and liabilities are recognised in the statement of financial position at the time of acquisition.

CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS AND LIABILITIES Financial assets and liabilities are classified in categories on the basis of the nature and purpose of the assets or liabilities. The determination of the classification of financial assets under IFRS 9 is fundamentally dependent on two criteria: the contractual cash flow of the instrument and the entity’s business model for the management of its financial instruments.

On initial recognition, all financial assets and liabilities are recognised at fair value. The costs directly related to transactions involving financial assets classified as financial assets measured at fair value through profit and loss are charged directly to the income statement. The costs directly related to transactions involving financial assets in other classifications are included in the transaction price.

Classification and measurement of financial assets Under IFRS 9, all financial assets are classified in two categories: they are either measured at amortised cost, or are measured at fair value.

When assets are measured at fair value then gains and losses are either fully recognised in the income statement (fair value through profit and loss, FVTPL) or under other comprehensive income (fair value through other comprehensive income, FVOCI).

Financial assets are classified at initial recognition, namely when the entity becomes party to the contractual provisions of the instrument. Reclassification of an asset at a later moment is possible when certain conditions are met.

Debt instruments Debt instruments that meet the following two conditions must be measured at amortised cost (net of any impairment) unless the fair value through profit and loss (FVTPL) option has been elected for the instrument:

• when the contractual cash flows are solely payments of principal and interest (SPPI test), and • the sole objective of the business model is to collect contractual cash flows (business model test).

Any difference between the transaction price and fair value at the time of initial recognition is credited or charged to the result. On the initial recognition of listed instruments any such difference is immediately recognised in the result. With all other instruments, any such difference is recognised in the result only on changes in factors, such as the time factor, that would determine the price in a regular transaction.

Debt instruments that meet the following two conditions must be measured at fair value through other comprehensive income (FVOCI) unless the fair value through profit and loss (FVTPL) option has been elected for the instrument:

• when the contractual cash flows are solely payments of principal and interest (SPPI test), and • the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

110 FINANCIAL STATEMENTS

Fair value option for financial assets Even if an instrument meets the two requirements to be measured at amortised cost or FVOCI, IFRS 9 contains an option to designate, at initial recognition, a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them with different principles.

Equity instruments All equity investments within the scope of IFRS 9 must be measured at fair value, with value changes recognised in the income statement, with the exception of equity instruments for which the entity has elected fair value through other comprehensive income (FVOCI).

Fair value through other comprehensive income (FVOCI) option When an equity investment is not held for trading then an entity can make an irrevocable election at initial recognition to measure the investment at FVOCI and recognise only dividend income in the income statement.

Classification and measurement of financial liabilities Financial liabilities held for trading are measured at FVTPL and all other financial liabilities are measured at amortised cost unless the fair value option is applied.

Fair value option for financial liabillities Financial liabilities may be measured at fair value when:

• doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them with different principles, or • the liability is part of a group of financial liabilities or financial assets and financial liabilities that is managed and of which the performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel.

A financial liability which does not meet any of these criteria may still be designated as measured at FVTPL when it contains one or more embedded derivatives that sufficiently modify the cash flows of the liability and are not clearly closely related.

IFRS 9 requires gains and losses on financial liabilities designated as at FVTPL to be split into the amount of the change in fair value attributable to changes in credit risk of the liability, which is to presented in other comprehensive income, and the remaining amount, which is to be presented in the income statement. The new guidance allows the recognition of the full amount of the change in fair value in the income statement only if the presentation of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in the income statement. This determination is made at initial recognition and is not reassessed.

Amounts presented in other comprehensive income are not subsequently recycled transferred to the income statement: the entity may only transfer the cumulative gain or loss within equity.

Cash and Banks Cash and Banks consists of cash, bank balances, and short-term deposits with original maturities of three months or less that are readily convertible into known amounts of cash. These assets have a limited impairment risk. Cash and receivables from banks are measured at amortised cost less a provision for expected credit loss.

Derivatives Derivatives are financial instruments requiring no or only a limited net initial investment, with future settlement dependent on the underlying notional amount of the contract and movements in certain rates or prices (such as the interest rate or the price of a financial instrument). Derivatives are recognised at fair value, whereby both unrealised and realised gains and losses are recognised directly in the income statement under Result from financial instruments.

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Financial assets and financial liabilities at fair value through profit and loss An instrument is classified as a financial asset or financial liability at fair value through profit and loss when it is held for trading or the fair value option is elected on initial recognition. BinckBank elects the fair value option for specific financial assets and liabilities on the grounds that the instrument eliminates or substantially reduces inconsistencies in measurement and recognition which would otherwise arise on the recognition of assets or of income and expenses with different principles. The financial assets and liabilities at fair value through profit and loss are recognised at fair value. Unrealised and realised gains and losses are recognised directly in the income statement under Result from financial instruments.

Investments at amortised cost Investments at amortised cost are characterised by fixed or specific payments and a fixed term. These financial instruments are measured at amortised cost only when they meet the business test and SPPI test. After initial recognition, these financial assets are measured at amortised cost using the effective interest method and less a provision for expected credit loss, where relevant.

Loans and receivables Loans and receivables are financial instruments with fixed or specific payments that are not listed on an active market. Loans and receivables are initially recognised at fair value. Subsequent measurement is at amortised cost using the effective interest method and less a provision for expected credit loss, where relevant.

Funds entrusted Funds entrusted are characterised by fixed or certain payments and are either payable on demand or, in the event of savings products, have a fixed term. The fair value option is not elected for these liabilities, and for this reason after initial recognition these instruments are measured at amortised cost with the application of the effective interest method.

EXPECTED CREDIT LOSSES ON FINANCIAL ASSETS AT AMORTISED COST A provision for expected credit loss must be raised for financial assets recognised at amortised cost or at fair value through other comprehensive income (FVOCI), such as bank balances, bonds, loans. and receivables, as well as for financial guarantees and irrevocable facilities. This provision is determined on the basis of an expected credit loss model that is dependent on the extent to which the credit risk of the counterparty changes relative to the initial recognition of the asset.

At each balance sheet date BinckBank assesses all financial assets measured at amortised cost for indications of changes in credit risk which could lead to adjustments to the expected credit loss on this financial asset or group of financial assets. A provision for expected credit loss is only recognised when there is an adverse effect on future cash flows. Reversals of expected credit loss are recognised in the income statement. Amounts subsequently collected after write-off are recorded in the income statement in expected credit loss.

The most important characteristics of the models for the determination of expected credit loss on Investments at amortised cost, Loans and receivables, Cash and balances at central banks and Due from banks are explained in more detail in note 41.5, Credit risks.

The expected credit loss model under IFRS 9 is based on a number of credit quality stages:

• Stage 1: Financial instruments that have not had a significant increase in credit risk since initial recognition. A provision for expected credit loss is recognised for these financial instruments based on the probability of default events occurring during the coming 12 months. Interest income is recognised on the basis of the effective interest rate on the gross carrying value; • Stage 2: Financial instruments with a significant increase in credit risk since initial recognition. A provision for expected credit loss is recognised for these financial instruments is based on the probability of default events over the expected life of the financial instrument (Lifetime ECL’. Interest income is recognised on the basis of the effective interest on the gross carrying value; • Stage 3: Financial instruments with a demonstrable loss event. A provision for expected credit loss is recognised for these financial instruments which is based on the probability of default events over the expected life of the financial instrument (Lifetime ECL). Interest income is recognised on the basis of the effective interest rate on the revised carrying value after deduction of the credit loss provision.

112 FINANCIAL STATEMENTS

Definition of significant deterioration of credit risk The various stages refer to ‘significant deterioration of credit risk’. BinckBank has adopted the following characteristics for the identification of a significant deterioration of credit risk:

• The borrower is in arrears by more than 2 payment periods, which is equivalent to more than 30 days (stage 2) or 90 days (stage 3); • The macro-economic factors exhibit a significant risk of significant deterioration of credit risk; • The external ratings of parties exhibit a relative deterioration of credit risk outside the specified bandwidths.

This definition has been specified for each asset on the basis of its characteristics. The assessment of the quality assessment of the credit risk of parties is in line with risk assessments carried out within the risk management framework.

BinckBank assesses all financial assets measured at amortised cost for any significant deterioration of credit risk. When a significant deterioration of credit risk of an asset arises, then the expected credit loss is determined on the basis of the probability of default during the lifetime of the asset rather than the probability of default during a period of 12 months. A significant deterioration of credit risk is determined by comparing the credit risk on reporting date with the credit risk determined on initial recognition of the asset. This assessment is carried out with objective, available and, when possible, prospective information.

Definition of default The definition of default is of great importance in determining the credit loss. BinckBank has adopted the following characteristics for the identification of a default:

• The borrower is in arrears for more than 90 days; • It is unlikely the borrower is able to fulfil its obligations

This definition has been specified for each asset on the basis of its characteristics. BinckBank uses both quantitative and qualitative indications in its assessments on whether the borrower will be able to fulfil its obligations.

Cash and balances with central banks and Due to banks Cash and balances with central banks and Due to banks are individually assessed for expected credit loss. The provision formed for expected credit loss is determined as the difference between the carrying value and the present value of expected future cash flows, taking account of guarantees and collateral. The movement in the provision is recognised in the income statement under Credit losses from financial assets.

Investments at amortised cost Investments at amortised cost are individually assessed for expected credit loss. The provision formed for expected credit loss is determined as the difference between the carrying value and the present value of expected future cash flows, taking account of guarantees and collateral, and discounted at the original effective interest rate. The movement in the provision is recognised in the income statement under Credit losses from financial assets.

Loans and receivables BinckBank’s loans and receivables item consists of loans collateralised by securities and receivables from mortgage rights.

Credit collateralised with securities is individually assessed for expected credit loss. The provision for expected credit loss on loans collateralised by securities is then determined both individually (stage 3) and collectively on the basis of the historical loss on the entire portfolio.

BinckBank assesses the individual receivables in the mortgage portfolio for expected credit loss. Changes in credit risk are monitored on the basis of payment arrears, forbearance measures and other additional agreements. BinckBank adopts a fixed criterion whereby arrears in interest and/or redemptions of more than 30 days are regarded as a significant deterioration of credit risk, after which these loans are included in stage 2. Loans with arrears in interest and/or redemptions of more than 90 days are included in stage 3.

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In determining the expected future cash flows from a financial asset for which collateral has been received BinckBank takes account of the potential cash flows that will arise on liquidation of the collateral less any costs that will be incurred in obtaining and selling the collateral.

The amount of any impairment loss is measured as the difference between the loan’s carrying amount and the present value of future expected cash flows, discounted at the original effective interest rate of the loan. The movement in the provision is recognised in the income statement under Credit losses from financial assets.

Financial guarantee contracts and irrevocable facilities BinckBank has issued a limited number of guarantee contracts to clients. These guarantees fall within the scope of the management of credit risk and are secured by securities collateral. The irrevocable facilities relate to outstanding mortgage offers for which BinckBank has a financing commitment to the service provider. In view of the nature of the products, the contractual terms and the collateral, BinckBank has assessed the expected credit loss on these off-balance sheet items as very limited and, consequently, has not recognised any provision for expected credit loss.

MODIFICATION OF FINANCIAL INSTRUMENTS Modification of financial instruments is an issue when the contract conditions are amended in the period between initial recognition and the maturity date (forbearance). Forbearance refers to the situation in which the bank, in view of the debtor’s deteriorating condition, has made concessions on the terms and conditions of the loan agreement that are intended to enable the client to fulfil the revised obligations. Amendments to existing contracts may impact future cash flows and, consequently, may impact the determination of the expected credit loss.

In case of amendments, BinckBank assesses the extent to which the amendments are significant and the conditions of the financial asset deviate significantly from the original instrument. When the amendments are significant then BinckBank will derecognise the original contract and recognise the instrument with the new terms. The difference between the carrying value, including the expected credit loss, and the fair value of the newly-recognised instrument is recorded in the income statement. When the amendments to the contract do not result in its derecognition then BinckBank assesses the credit risk on the basis of the new terms and, if necessary, adjusts the expected credit loss to the situation, whereby the original effective interest rate is maintained.

WRITE-OFFS AND RECOVERIES Financial assets at amortised cost are written off when there is no reasonable expectation of full or partial repayment. Writing off a receivable is, in principle, equal to its derecognition. Any cash flows received on written-off assets, where relevant, are recognised directly in the income statement.

DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES A financial asset (or, when applicable, a component of a financial asset or part of a group of similar financial assets) is no longer recognised on the statement of financial position when:

• BinckBank ceases to have a right to the cash flows from the asset; or • BinckBank retains the right to receive the cash flows from the asset but has entered into an obligation, pursuant to a special agreement, to pay them to a third party in their entirety and without significant delay; and • BinckBank has transferred its rights to receive the cash flows from the asset and has either (a) largely transferred all risks and rewards of the asset or (b) not largely transferred all risks and rewards of the asset, or retained them fully, but has transferred control of the asset.

If BinckBank has transferred its rights to receive the cash flows from an asset but has not largely transferred all risks and rewards of the asset or retained them fully and has not transferred control of the asset, then that asset continues to be recognised for as long as BinckBank remains involved with the asset. Financial liabilities are no longer recognised in the statement of financial position once the performance relating to the obligation has been completed or the obligation has been withdrawn or has expired.

114 FINANCIAL STATEMENTS

OFFSETTING FINANCIAL ASSETS AND LIABILITIES Financial assets and financial liabilities are generally presented gross in the statement of financial position. Financial assets and liabilities are set off against each other and the net amount is presented in the statement of financial position at the time that there is a legally enforceable right to set off the amounts and there is an intention to settle the instruments on a net basis, or to realise the asset and settle the liability simultaneously. An entity needs to possess a continuous legally enforceable offsetting right to meet the offsetting criterion.

Consequently, the offsetting right: • may never be contingent on a future event; and • must be legally enforceable in all the following circumstances: - within the context of the normal course of business; - in the event of default; and - in the event of the insolvency or bankruptcy of the entity and of all counterparties.

HEDGE ACCOUNTING BinckBank has decided, on the basis of its risk policy, to hedge interest rate risk on the balance sheet with interest-rate derivatives. BinckBank elects for the application of IAS 39 for hedge accounting, in accordance with IFRS 9, Financial instruments. In this hedging relationship, the interest-rate derivatives are regarded as hedging instruments and a designated proportion of the cash flows from the mortgage rights as the hedged item. BinckBank determines and documents the hedged instrument and the hedging instruments at the inception of the hedge. Furthermore BinckBank assesses hedge effectiveness both at inception and on continuous basis.

The movements in the fair values of the hedging instruments and the hedged item are recognised in the same line of the income statement. Hedge accounting with an effective hedge relationship results in changes in the fair value of hedging instrument and hedged item that set-off each other. On balance, the ineffective portion of the hedge relationship remains as Result from financial instruments in the income statement. The fair value adjustment of the hedged item recognised in the statement of financial position is then amortised over the weighted average term of the hedged items.

SECURITIES LENDING TRANSACTIONS Securities lending and borrowing transactions are usually collateralised by securities or cash. The related securities in the borrowing or lending transaction are not recognised (borrowing transactions) or derecognised (lending transactions) on the statement of financial position. The collateral received or paid as securities is not recognised respectively derecognised on the statement of financial position. Collateral received or paid as cash is recognised in the statement of financial position as cash advanced (included in due from banks and loans) or received (due to banks or due to customers). Interest received or paid are recognised on an effective interest basis and recorded as interest income or interest expense.

4.3 ACQUISITIONS AND GOODWILL All acquisitions are recognised using the acquisition method. The identifiable assets, equity, and liabilities of the acquired company or activities are recognised at fair value. Transaction costs associated with an acquisition are recognised directly in the income statement.

The measurement is performed using cash flow models and/or royalty models. BinckBank makes assumptions and projections of future revenues and results in order to determine the cash flows and the applicable discount rate. Where the royalty method is used, an estimate is also made of the appropriate royalty percentage. BinckBank makes an estimate of the potential agreements on earn-out arrangements on the basis of the expected future results of the acquired companies or activities. These earn-out arrangements form part of the price paid for the acquired company or activities. An annual assessment is made to determine whether the earn-out obligation should be adjusted in the light of any changes to the development of the results. Adjustments to the earn-out calculations after completion of the acquisition are recognised directly in the income statement.

115 FINANCIAL STATEMENTS

On initial recognition, goodwill acquired in a combination is measured as the difference between the acquisition price and BinckBank’s share of the net fair value of the identifiable assets, liabilities, and contingent liabilities of the acquired company or activities. Subsequently, goodwill is measured at cost less any cumulative impairment losses. Goodwill is recognised under intangible assets. Any negative difference between acquisition price and fair value is recognised directly in the income statement. Adjustments to the fair value of acquired assets and liabilities at the acquisition date that are identified before the end of the first year after the acquisition result in an adjustment of the goodwill. Adjustments identified at a later date are recognised as a gain or loss in the income statement.

Goodwill is tested for impairment annually, or more frequently when events or changed circumstances indicate that the carrying amount could be impaired. For this impairment test, goodwill acquired in a business combination is allocated from the acquisition date to BinckBank’s cash flow generating units or groups of cash generating units that are expected to benefit from the synergy of the business combination. An impairment is measured by assessing the recoverable amount of the cash generating unit to which the goodwill relates. The recoverable amount is an assets net selling price or its value in use, whichever is higher. An impairment is recognised when the recoverable amount is lower than the carrying amount. Impairment of goodwill is not reversed.

A third-party interest in the acquired company is measured at either the fair value on acquisition date or of the proportional share in the identifiable assets and liabilities of the acquired company or activities.

Gains and losses on the disposal of a company or activity are determined as the difference between the proceeds from disposal and the carrying amount of the company or activity, including goodwill and currency translation reserve.

4.4 ASSOCIATES Associates are entities in which BinckBank generally holds between 20% and 50% of the voting rights or in which BinckBank is able to exercise significant influence in some other manner while BinckBank does not have control. Investments in associates are recognised using the equity method. Under the equity method, BinckBank’s share in the results of the associate is recognised in BinckBank’s income statement as Share in results of associates. BinckBank’s share in changes in the reserves of an associate is recognised directly in BinckBank’s equity. The carrying amount of the investment is adjusted for these reported results and changes in reserves. When the carrying amount of the investment in an associate falls to nil then no further losses are recognised unless BinckBank has accepted liabilities on behalf of the associate or has already made payments on behalf of the associate. Where necessary, the accounting principles of associates are adjusted to bring them into line with those of BinckBank.

4.5 INTANGIBLE ASSETS Intangible assets acquired separately are measured at cost on initial recognition. The cost of intangible assets acquired in a business combination is their fair value at acquisition date. Subsequently, intangible assets are carried at cost less cumulative amortisation and any cumulative impairments.

Intangible assets are determined as having either a finite or an indefinite useful life. Intangible assets with a finite useful life are amortised over the useful life and tested for impairment when there are indications that an intangible asset may be impaired. The useful lives of the intangible assets are assessed annually and adjusted if there has been a change. Amortisation of intangible assets with a finite useful life is presented in the income statement under depreciation and amortisation. Intangible assets with an indefinite useful life are subjected to an annual impairment test, either individually or at the level of the cash-flow generating unit. These intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reassessed annually, including an assessment of whether the indefinite useful life continues to be justifiable.

116 FINANCIAL STATEMENTS

4.6 PROPERTY, PLANT, AND EQUIPMENT Property for own use is carried at historical cost less cumulative depreciation and impairments. All other assets recognised in the statement of financial position as plant and equipment are carried at historical cost less cumulative depreciation and any impairments. Property, plant, and equipment are subject to straight-line depreciation on the basis of useful life, taking account of the residual value.

The expected useful life is:

Property (own use) 50 years

Computer hardware 5 years

Fixtures, fittings and equipment 5-10 years

Other fixed assets 5 years

When an asset consists of various ‘components’ with different useful lives and/or different residual values then the asset is divided into these components and depreciation is applied separately. Useful life and residual value are assessed annually. When it emerges that the estimated values differ from previous estimates then the values are adjusted. When the carrying amount of an asset is higher than the estimated realisable value then an impairment is recognised which is charged to the income statement. Results on the sale of property, plant and equipment, being the difference between the sale proceeds and the carrying amount, are recognised in the income statement in the period in which the sale takes place. Repair and maintenance costs are charged to the income statement in the period to which they relate. The costs of significant renovations are capitalised when it is probable that additional future benefits will be realised from the existing asset. Significant renovations are written off on the basis of the remaining useful life of the asset concerned. Leasehold prepayments are recognised in investment value in real estate. Amortisation of the leasehold is applied on a linear basis over the remaining life to maturity.

4.7 TAX CURRENT TAX Current tax (corporation tax) concerns immediately payable and offsettable tax assets and liabilities for current and prior years, measured at the amount expected to be claimed from or paid to the relevant tax authorities. The tax amount is calculated on the basis of the enacted tax rates and applicable tax legislation.

DEFERRED TAX Deferred tax liabilities are recognised on the basis of the temporary differences, at the balance sheet date, between the tax base of assets and liabilities and their carrying amount in these financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences except:

• when the deferred tax liability arises on the initial recognition of goodwill or the initial recognition of an asset or a liability in a transaction that is not a company acquisition and does not affect the operating profit before tax or the taxable profit; • when taxable temporary differences are related to investments in subsidiaries and associates whereby BinckBank is able to control the timing of the settlement of the temporary difference in autonomy and it is probable that the temporary difference will not be settled in the near future.

Deferred tax assets are recognised for all deductible temporary differences, unused tax facilities and unused tax loss carry forwards when it is probable that they can be offset against taxable profits. The carrying amount of the deferred tax assets is assessed at reporting date and reduced to the extent that it is not probable that sufficient taxable profits will be available against which some or all of the deferred tax asset can be offset.

Deferred tax assets and liabilities are measured at the tax rates expected to be applicable to the period in which the asset is realised or the liability is settled, as based on the enacted tax rates and applicable tax legislation. The tax on items recognised directly in equity is recognised directly in equity instead of in the income statement. Deferred tax assets and liabilities are recognised as a net amount when there is a legally enforceable right to set off deferred tax assets against deferred tax liabilities and the deferred tax is related to the same taxable entity and the same tax authority.

117 FINANCIAL STATEMENTS

4.8 IMPAIRMENT OF NON-FINANCIAL ASSETS The carrying amount of BinckBank’s assets is tested at each balance sheet date to determine whether there are indications for impairment. When there are any such indications then the recoverable amount of the asset is estimated. The recoverable amount is an assets net selling price or the value in use, whichever is higher. An impairment is recognised when the carrying amount of an asset exceeds the recoverable amount.

4.9 FUNDS ENTRUSTED Funds entrusted comprise savings deposits, demand deposits, and other deposits. These are measured at fair value on initial recognition, inclusive of the transaction costs. Thereafter, they are measured at amortised cost.

4.10 PROVISIONS A provision is recognised if:

• BinckBank has a present legal or constructive obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the amount of the obligation.

When it is expected that some or all of a provision will be reimbursed, then the reimbursement is recognised only when reimbursement is virtually certain. The expense relating to any provision is recognised net of any reimbursement in the income statement. When the effect of the time value of money is material then the provisions are discounted at a rate, before tax, that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

4.11 PENSIONS BinckBank operates a pension plan for its Executive Board and employees based on a defined contribution scheme. In a defined contribution scheme, a percentage of the employee’s fixed salary is paid as contribution to a pension insurer. The percentage payable is age-related. The pension contributions are recognised in the year to which they relate.

4.12 TREASURY SHARES Equity instruments which are reacquired (treasury shares) are deducted from equity at acquisition price inclusive of the transaction costs. Gains or losses on the purchase, sale, issue or withdrawal of BinckBank’s own equity instruments are not recognised in the income statement.

4.13 OFF-BALANCE SHEET COMMITMENTS BinckBank has commitments that have a potential credit risk but which do not meet the recognition criteria and, for this reason, are not recognised in the statement of financial position.

CONTINGENT LIABILITIES Contingent liabilities are liabilities that are not recognised in the statement of financial position because their existence is dependent on the occurrence or non-occurrence of one or more uncertain future events not wholly within BinckBank’s control. The maximum potential credit risk associated with these contingent liabilities faced by BinckBank is disclosed in the notes. In estimating the maximum potential credit risk, it is assumed that all counterparties default on their contractual obligations and that all received collateral is without value.

IRREVOCABLE FACILITIES Irrevocable facilities are unused credit facilities and all other obligations pursuant to irrevocable commitments that can result in the issuance of loans.

LEASE ARRANGEMENTS Lease arrangements whereby the risks and benefits relating to the right of ownership are retained largely by the lessor are designated as operating leases. Lease payments made in the capacity of lessee in relation to operating leases are charged to the result during the lease period, after deduction of any premiums received from the lessor. BinckBank is only involved in operational lease contracts as a lessee.

118 FINANCIAL STATEMENTS

4.14 NET INTEREST INCOME Interest income consists of the interest on monetary financial assets attributable to the period. Interest on financial assets is recognised using the effective interest method based on the actual acquisition price. The effective interest method is based on the expected flow of cash receipts, taking account of the risk of early redemption of the underlying financial instrument and the direct costs and revenues, such as the transaction costs charged and any discount or premium. When the risk of early redemption cannot be measured with sufficient reliability, then BinckBank adopts the cash flows during the entire term to maturity of the financial instruments. Interest income on financial assets subject to impairment which have been written down to the estimated realisable value or fair value are subsequently recognised on the basis of the interest rate that is used to determine the realisable value by discounting the future cash flows.

Interest expenses include interest expenses on all financial obligations and are recognised on the basis of the effective interest method, as well as negative interest paid on financial assets.

4.15 NET COMMISSION INCOME Commission income comprises payments, excluding interest, received or to be received from third parties, whether on a non-recurring or more regular basis, in respect of brokerage, asset management, and other services. Income is recognised when the service has been provided or to the extent that part of the transaction price can be allocated to the performance completed.

Commission expense comprises payments, excluding interest, paid or to be paid to third parties, respectively, whether on a non-recurring or more regular basis, in respect of brokerage, asset management, and other services.

4.16 RESULT FROM FINANCIAL INSTRUMENTS The result from financial instruments relates to the results from derivatives and financial assets and liabilities recognised at fair value through profit and loss. The result consists of the movements in the value of these financial instruments attributable to the period.

BinckBank applies fair value hedge accounting to the interest rate risk. The result from financial instruments includes the ineffective portion of hedge accounting relation.

4.17 CREDIT LOSSES ON FINANCIAL ASSETS Credit losses comprise the movement in the provisions for expected credit loss. This result also contains actual credit loss recorded directly in the profit and loss and recoveries made on loans formerly written off. More information about the principles for impairments of financial assets is enclosed in note 4.2, Financial assets and liabilities.

4.18 OTHER INCOME All revenues that cannot be classified under other items but do belong to the operating activities are recognised under other income.

4.19 EMPLOYEE EXPENSES Employee expenses comprise salaries, pension costs, social security contributions, and other employee expenses, such as expenses for share-based payments.

Employees can be eligible for share based payments. The expenses of these transactions with employees settled in equity instruments are determined on the basis of the fair value on the date on which they are awarded. The fair value is based on the underlying price of the share on the date on which they are awarded. The expenses of transactions in own equity instruments are, with a corresponding adjustment in equity, recognised in the period in which the conditions relating to the performance obligations are fulfilled and end on the date on which the relevant employees acquire the full right to the granted shares (the date on which the transaction becomes unconditional). The conditional shares are recognised at fair value, taking into account missed dividends and a lock-up period.

The payment of the variable performance pay in cash to the Executive Board and Identified Staff is made after expiry of the remuneration year and in the three succeeding years. The recognised current liability and non-current cash liability are determined on the basis of the estimated liabilities accrued for performances delivered until balance sheet date.

119 FINANCIAL STATEMENTS

4.20 DEPRECIATION AND AMORTISATION This relates to depreciation on property, plant and equipment and amortisation of intangible assets. Information on the principles for depreciation and amortisation is enclosed in the notes to property, plant and equipment and to intangible assets.

4.21 TAX Tax is recognised in the income statement unless the tax relates to items recognised directly in equity, in which case the tax is recognised in other comprehensive income and directly in equity.

4.22 EARNINGS PER ORDINARY SHARE The earnings per ordinary share are calculated on the basis of the weighted average number of outstanding ordinary shares. The following considerations are taken into account in the calculation of the weighted average number of outstanding ordinary shares:

• The total number of ordinary shares issued is reduced by the treasury shares held by all group companies; • The calculation is based on daily averages.

The diluted earnings per ordinary share are calculated by adjusting the weighted average number of shares during the period for potential dilution, for example due to outstanding option entitlements. The conditionally allocated shares arising from share-based payments are not entitled to dividend and are only included in the calculation of the earnings per share at the time they become unconditional.

120 FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(amounts in € 000’s) 31 December 2018 31 December 2017

5. CASH AND BALANCES AT CENTRAL BANKS 1,096,838 1,003,573

Cash and balances at central banks 1,097,168 1,003,673

Accrued interest* (160) (136)

Provision for expected credit loss (170) -

1,096,838 1,003,537

* Includes change in presentation, see note 2.5

This item includes all cash in legal tender, including bank notes and coins in foreign currency, and any credit balances available on demand from the central banks in countries where BinckBank has offices and the European Central Bank.

6. BANKS

Due from banks 134,675 133,968 This item includes all cash and cash equivalents relating to the business activities held in accounts with credit institutions supervised by bank regulators.

This item comprises:

Balances available on demand 99,891 101,409

Mandatory reserve deposits 34,898 32,559

Accrued interest* - -

134,789 133,968

Provision for expected credit loss (114) -

134,675 133,968

* Includes change in presentation, see note 2.5

The balances on demand all have original maturities of less than three months. The interest received on the bank balances available on demand are based on floating rates. The mandatory reserve deposits at central banks are not free for withdrawal. The fair value of the bank balances does not significantly differ from the carrying value due to the short term nature of the related assets.

Due to banks 5,274 2,538

The fair value of the bank balances does not significantly differ from the carrying value due to the short term nature of the related liabilities.

121 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

7. DERIVATIVES

Derivative assets 24,277 37,311

Derivatives held in a hedge relationship

Interest rate swaps* - 274

Other derivatives

Turbos 24,229 36,912

Other 48 125

24,277 37,311

Derivatives liabilities 26,759 37,055

Derivatives held in a hedge relationship

Interest rate swaps* 2,071 28

Other derivatives

Turbos 24,266 36,928

Other 422 99

26,759 37,055

* Includes change in presentation, see note 2.5

BinckBank uses interest rate swaps to manage interest rate risk. BinckBank has concluded ISDA contracts, inclusive of netting agreements, with a legal right to set off cash flows on the maturity date of the contracts or in the event of default. The derivatives have a notional value of € 146 million (2017: € 96 million). The margin paid on the interest-rate derivatives at 31 December 2018 is € 2.1 million. All interest rate swaps are part of a hedging relationship for whichfair value hedge accounting is applied.

In fair value hedge accounting the relationships match the interest rate risks on the designated cash flows of the mortgage portfolio. The hedge relationship is determined monthly following a prospective test of the hedge effectiveness. The effectiveness expresses the degree to which the movement in the fair value of the hedged instrument (cash flow from mortgages) is matched by the fair value movement of the hedging instrument (interest rate swap). A retrospective test carried out at the end of the monthly hedging relationship period measures the actual ineffectiveness. This uses a 36-month regression analysis to assess the effectiveness of the current hedge relationship. Ineffectiveness can arise for a number of reasons, such as:

• mismatch of the timing of interest payments or receipts of the interest rate swap and the cash flows from the mortgages; • variances in the actual cash flows as compared to the expected cash flows from the mortgages; • the swap curves used for the measurement of the derivative includes a credit risk surcharge that is not hedged in the hedging relationship.

122 FINANCIAL STATEMENTS

The details of the hedge accounting relationship are shown in the following table: Change in Carrying Carrying revaluation in (amounts in € 000’s) Notional value amount debet amount credit hedge relation

31 December 2018

Interest rate swaps 146,000 - (2,071) (2,065)

Loans and receivables 1,407,394 - -

Fair value adjustment hedged instrument 2,255 - 2,535

Ineffectiveness hedge accounting 470

31 December 2017

Interest rate swaps 96,000 274 (28) 353

Loans and receivables 1,303,577 - -

Fair value adjustment hedged instrument (280) - (280)

Ineffectiveness hedge accounting 73

BinckBank issues turbos under its own name to customers. The price risk on an issued turbo position is hedged economically by purchasing a turbo with identical conditions from a third party. The difference in the market value of the purchased and issued turbos is due to the use of a different discount for the credit value adjustment (CVA) for BinckBank on the counterparty and for the customer on BinckBank.

(amounts in € 000’s) 31 December 2018 31 December 2017

8. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through the profit or loss 13,721 16,613

Financial liabilities at fair value through the profit or loss 161 231

123 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

9. INVESTMENTS AT AMORTISED COST 1,033,590 -

This item comprises:

Government bonds/government-guaranteed bonds* 260,636 -

Other bonds* 773,181 -

Amortised cost as at 31 December 1,033,817 -

Provision for expected credit loss (227) -

Balance sheet value as at 31 December 1,033,590 -

* Includes change in presentation, see note 2.5

Movements in investments at amortised cost were:

Amortised cost as at 31 December prior year - -

IFRS 9 transition adjustment 1,138,828 -

Amortised cost as at 1 January 1,138,828 -

Redemptions (460,692) -

Purchases 361,929

Foreign currency translation 10,320 -

Amortisation of premiums/discounts (13,600) -

Movement in accrued interest (2,968) -

Amortised cost as at 31 December 1,033,817 -

Provision for expected credit loss (227) -

Balance sheet value as at 31 December 1,033,590 -

BinckBank holds a porfolio of financial assets valued at amortised cost. This is a portfolio of interest bearing securities with remaining terms until maturity of less than 3.5 years. At year end 2018 the effective yield on the portfolio was 0.52%. This balance sheet item is a result of the implementation of IFRS 9. In 2017 these financial assets were classified under available-for-sale financial assets and held-to-maturity financial assets.

The movements in the provision for expected credit loss is detailed in section 41.5 on credit risk.

124 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 797,294

This item comprises:

Government/government-guaranteed bonds - 33,865

Other bonds - 753,878

Accrued interest* - 9,551

- 797,294

* Includes change in presentation, see note 2.5

Movements in financial assets available-for-sale were:

Amortised cost as at 31 December prior year 796,638 731,976

IFRS 9 transition adjustment (796,638) -

Amortised cost as at 1 January - 731,976

Redemptions - (248,125)

Purchases - 334,023

Foreign currency translation - (9,156)

Amortisation of premiums/discounts - (12,752)

Movement in accrued interest - 672

Amortised cost as at 31 December - 796,638

Revaulation as at 31 December - 656

Balance sheet value as at 31 December - 797,294

This item was a portfolio of interest bearing securities with a remaining term with a maturity of less than 3 years. This item has been reclassified as a result of the implementation of IFRS 9 and is now included in the Investments at amortised cost.

125 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

11. HELD-TO-MATURITY FINANCIAL ASSETS - 342,190

This item comprises:

Government/government-guaranteed bonds - 257,844

Other bonds - 82,335

Accrued interest* - 2,011

- 342,190

* Includes change in presentation, see note 2.5

Movements in held-to-maturity investments were:

Amortised cost as at 31 December prior year 342,190 797,439

IFRS 9 transition adjustment (342,190) -

Amortised cost as at 1 January - 797,439

Redemptions - (499,607)

Purchases - 74,558

Foreign currency translation - (19,599)

Amortisation of premiums/discounts - (5,194)

Movement in accrued interest - (5,407)

Amortised cost as at 31 December - 342,190

This item was a portfolio of interest bearing securities with a remaining term until maturity of less than 3 years. This item has been reclassified as a result of the implementation of IFRS 9 and is now included in the Investments at amortised cost.

12. LOANS AND RECEIVABLES 1,409,649 1,303,297

The analysis is as follows:

Receivables collateralised by securities 592,531 558,796

Receivables collateralised by bank guarantees 5,292 2,739

Receivables collateralised by residential property 804,621 736,738

Accrued interest* 6,441 5,467

Other receivables 724 508

Loans and receivables, gross 1,409,609 1,304,248

Provision for expected credit loss (2,215) (671)

1,407,394 1,303,577

Fair value adjustment hedge accounting 2,255 (280)

1,409,649 1,303,297

* Includes change in presentation, see note 2.5

126 FINANCIAL STATEMENTS

The receivables covered by securities and bank guarantees contain loans collateralised by securities. The interest rate on these loans is based on EURIBOR or EONIA, with a floor. BinckBank invests in mortgage receivables on Dutch residential mortgages. The portfolio comprises variable interest terms and fixed interest terms for periods between one month and thirty years. Part of the mortgage portfolio has guarantees under the National Mortgage Guarantee Scheme (NHG) and amounts to € 296 million as at 31 December 2018 (31 December 2017: € 318 million). The interest rates for the mortgage portfolio range from 1.3% to 6.4%.

The movements in the provision for expected credit loss is detailed in section 41.5 on credit risk.

(amounts in € 000’s) 31 December 2018 31 December 2017

13. INVESTMENT IN ASSOCIATES - 485

This refers to the investment in TOM Holding N.V.

Movements during the year were as folows:

Balance as at 1 January 485 -

Capital increases and acquisitions - 1,504

Dividends and capital refunds (485) -

Impairments subsidiaries - 227

Results for the year - (1,246)

Balance as at 31 December - 485

In 2017 TOM Holding N.V. wound down its activities and was subsequently liquidated during 2018. The residual value after liquidation has been remitted to the shareholders in proportion to their shareholdings.

127 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

14. INTANGIBLE ASSETS 157,214 157,950

The movements in 2018 were as follows: Brand Customer Customer name deposits base Software Goodwill Total

Balance as at 1 January 2018 105 - 195 3,785 153,865 157,950

Investments - - - 581 - 581

Disposals-cost - - - (6,291) - (6,291)

Disposals-cumulative amortisation - - - 6,291 - 6,291

Impairment ------

Amortisation (70) - (130) (1,117) - (1,317)

Balance as at 31 december 2018 35 - 65 3,249 153,865 157,214

Cumulative cost 350 - 650 4,986 153,865 159,851

Cumulative amortisation and impairment (315) - (585) (1,737) - (2,637)

Balance as at 31 december 2018 35 - 65 3,249 153,865 157,214

Amortisation period (years) 5 10 5-10 5

The movements in 2017 were as follows: Brand Customer Customer name deposits base Software Goodwill Total

Balance as at 1 January 2017 175 8,409 13,431 1,363 144,882 168,260

Investments - - - 3,738 8,983 12,721

Disposals – cost (31,405) (84,095) (131,058) (4,139) - (250,697)

Disposals – cumulative amortisation 31,405 84,095 131,058 4,016 - 250,574

Impairment ------

Amortisation (70) (8,409) (13,236) (1,193) - (22,908)

Balance as at 31 December 2017 105 - 195 3,785 153,865 157,950

Cumulative cost 350 - 650 10,696 153,865 165,561

Cumulative amortisation and impairment (245) - (455) (6,911) - (7,611)

Balance as at 31 December 2017 105 - 195 3,785 153,865 157,950

Amortisation period (years) 5 10 5-10 5

The Brand name, Customer deposits, and Customer base items arose on acquisitions of activities. Software comprises purchased software licences and software obtained on acquisitions of activities. At the end of 2017, the intangible assets relating to the acquisition of Alex Vermogensbank are fully amortised.

The goodwill item relates to the surplus of the cost as compared to the fair value of the identifiable assets and liabilities on the acquisition of activities.

128 FINANCIAL STATEMENTS

GOODWILL IMPAIRMENT TEST The goodwill presented in the statement of financial position has been allocated entirely to the cash generating unit Retail Nederland. Goodwill is tested for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount might be impaired. An impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. An impairment is recognised when the recoverable amount is lower than the carrying amount. The recovarable amount is the highest of the fair value less cost of disposal and its value in use.

In 2018, the realisable value of the cash-flow generating unit is based on the fair value less costs to sell. The fair value adopted is based on the planned public offer of Saxo Bank for the shares in BinckBank at an offer price of € 6.35 (cum dividend) per share. As this is a public offer from an informed and benevolent party the fair value is classified as a level 1 value in the fair value hierarchy. This fair value is then allocated to the share of the Retail Nederland cash-flow generating unit relative to BinckBank in its entirety.

No reliable fair value was available in 2017, and for this reason the realisable value is based on value in use. In 2017, management set targets using cash flow projections over a five-year period that were based on financial estimates. Cash flows beyond the five-year period have been extrapolated using a growth rate of 2.0%. Management has compared the principal assumptions made in 2017 against market estimates and market expectations. In 2017, the calculation was based on a discount rate of 10.5%.

The principal assumptions used by management in arriving at the cash flow projections for the purposes of the goodwill impairment test in 2017 were:

• The natural attrition rate and inflow of new private investors based on the trends of the past 5 years and the budget, including a multi-year forecast, respectively; The estimated growth in the number of customers is reflected in the expected numbers of transactions and the entrusted and placed funds; • The interest margin based on the interest margin realised in the previous year, allowing for the long-term effect of a low interest rate; • Commission income and expense, based on the expected average number of transactions and the average commission income and expense per transaction. The average income, expense and number of transactions are based on recognised trends in the previous year.

In 2018, the impairment test revealed a value in use based on fair value that was higher than the carrying amount. The results of the test gave no indications of an impairment, and the derived market value was still 30% higher than the carrying amount of the Retail Netherlands cash-flow generating unit (2017: 111%). At 31 December 2018, there were no changes in circumstances as compared to the impairment test carried out the fourth quarter that might give rise to new insights that could lead to the recognition of an impairment.

IMPAIRMENT TESTING OF OTHER INTANGIBLE ASSETS The other intangible assets are tested for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount might be impaired. At the end of 2018, the other intangible assets were almost fully amortised and there was no indication of impairment of the remaining assets.

129 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

15. PROPERTY, PLANT AND EQUIPMENT 32,006 33,969

The movements in 2018 were as follows:

Fixtures, fittings and Computer Real estate equipment hardware Other Total

Balance as at 1 January 2018 25,202 2,855 5,877 35 33,969

Investments - 138 1,653 47 1,838

Disposals – cost - (12) (2,376) (48) (2,436)

Disposals – cumulative depreciation - 12 2,376 48 2,436

Depreciation (618) (1,032) (2,112) (39) (3,801)

Balance as at 31 December 2018 24,584 1,961 5,418 43 32,006

Cumulative cost 29,827 10,440 11,797 59 52,123

Cumulative depreciation and impairment (5,243) (8,479) (6,379) (16) (20,117)

Balance as at 31 December 2018 24,584 1,961 5,418 43 32,006

Depreciation period (years) 50 5-10 5 5

The movements in 2017 were as follows:

Fixtures, fittings and Computer Real estate equipment hardware Other Total

Balance as at 1 January 2017 25,821 3,422 5,844 41 35,128

Investments - 991 2,827 - 3,818

Disposals – cost - (969) (8,862) - (9,831)

Disposals – cumulative depreciation - 477 8,261 - 8,738

Depreciation (619) (1,066) (2,193) (6) (3,884)

Balance as at 31 December 2017 25,202 2,855 5,877 35 33,969

Cumulative cost 29,827 10,314 12,520 60 52,721

Cumulative depreciation and impairment (4,625) (7,459) (6,643) (25) (18,752)

Balance as at 31 December 2017 25,202 2,855 5,877 35 33,969

Depreciation period (years) 50 5-10 5 5

The market value of the properties has been assessed and is higher than the carrying value. This did not give rise to an impairment of the property. Developments in the Dutch offices market gave no reason to revise this assessment. The investment in real estate includes prepayments in relation to a leasehold (operating lease) that expires on 15 April 2056. In 2018, an amount of € 256 thousand relating to amortisation of the leasehold is recognised under depreciation and amortisation (2017: € 256 thousand).

130 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

16. CURRENT TAX

Current tax assets 16,622 16,725

The balance at year-end relates to the last three financial years.

Current tax liabilities 12 10

The reconciliation of the effective tax rate with the tax rate applicable to the consolidated financial statements is as follows:

2018 2018 2017 2017 Amount Percentage Amount Percentage

Standard tax rate 8,966 25.0% 2,062 25.0%

Effect of different tax rates (in other countries) 137 0.4% 66 0.8%

Effect of substantial-holding exemptions (2,109) -5.9% (216) -2.6%

Effect of tax facilities (118) -0.3% (2,256) -27.4%

Other effects (6,476) -18.1% 70 0.9%

Total tax expense 400 1.1% (274) -3.3%

The tax burden for 2018 amounts to € 0.4 million, which leads to an effective tax rate of 1.1%. The effective tax rate is lower than the nominal tax rate, partly as a result of participation exemptions. In addition, a one-off tax benefit of € 6.3 million has been included in the 2018 tax charge as a result of the application of the lower corporate income tax rates to deferred tax liabilities. The new rates are based on the Tax Plan 2019, in which the current tax rate will be incrementally reduced from 25% in 2019 to 20.5% in 2021.

The effect of the tax facilities during 2017 includes the benefits derived from the settlement reached between BinckBank and the Dutch Tax and Customs Administration on the application of the Innovation Box. In addition, the tax facilities recognise a liquidation loss from the cumulative losses in the participation in TOM Holding N.V., which after its liquidation was deducted from the taxable profit of BinckBank N.V.

Information about BinckBank’s policy on tax matters is enclosed in the tax policy section in the Annual Report.

131 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

17. DEFERRED TAX

Deferred tax assets 468 6,279

Deferred tax liabilities (29,996) (36,443)

Total asset/(liability) (29,528) (30,164)

Maturity of deferred tax receivables:

Within one year 468 6,279

Between 1 and 5 years - -

Longer than five years - -

468 6,279

Maturity of deferred tax liabilities:

Within one year - (164)

Between 1 and 5 years (116) (352)

Longer than five years (29,880) (35,927)

(29,996) (36,443)

Movement Movement via income via balance 31 December 1 January 2018 statement sheet 2018

Origin of deferred tax assets and liabilities

Compensating losses 2,948 - (2,480) 468

Liquidation loss associates 3,288 - (3,288) -

Goodwill and intangible assets (35,976) 6,521 (250) (29,705)

Depreciation period differences for fixed assets (489) 11 187 (291)

Temporary differences as a result of intercompany transactions 232 (232) - -

Other (3) - 3 -

Total deferred tax (30,000) 6,300 (5,828) (29,528)

132 FINANCIAL STATEMENTS

Movement Movement via income via balance 31 December (amounts in € 000’s) 1 January 2017 statement sheet 2017

Origin of deferred tax assets and liabilities

Compensating losses 1,048 1,900 - 2,948

Liquidation loss associates - 3,288 - 3,288

Available-for-sale financial assets* (280) - 116 (164)

Goodwill and intangible assets (31,492) 117 (4,601) (35,976)

Depreciation period differences for fixed assets (625) (22) 158 (489)

Temporary differences as a result of intercompany transactions 465 (233) - 232

Other (50) (8) 55 (3)

Total deferred tax (30,934) 5,042 (4,272) (30,164)

* The opening balance in 2018 of the deferred tax relating to the Available-for-sale financial assets has been adjusted to nihil resulting for the transation to IFRS 9.

The tax losses carried forward at the end of 2017 pertain to the deferred tax claim for compensating losses of BinckBank N.V. The expectation is that in the tax calculation the full amount of compensating losses can be offset against positive results in the coming years.

The liquidation loss of subsidiaries refers to the cumulative losses in the associate TOM Holding N.V. which have been deducted from the fiscal result of BinckBank N.V. following the completion of the liquidation of TOM Holding N.V. in 2018.

Goodwill and intangible assets in the deferred tax liabilities relate to the differences between the commercial and fiscal amortisation of the goodwill and intangible assets acquired in acquisitions of Alex, Fundcoach and Pritle. The change in deferred tax is mainly due to the application of a reduction in the corporate income tax rate in the valuation of deferred taxes. The new tariffs used are based on the tax plan 2019, in which the corporate income tax rate gradually decreases from 25% in 2019 to 20.5% in 2021.

The depreciation period differences for fixed assets relate to factors including accelerated tax depreciation on certain investments in fixed assets in the years 2010 and 2011.

The temporary differences as a result of intercompany transactions originated from eliminated consolidated transactions, where the current tax in the different tax entities is recorded at different times over a period of several years.

18. OTHER ASSETS 138,526 58,754

This item comprises:

Trade receivables 1,013 483

Receivables relating to securities sold but not yet delivered 121,817 47,362

Cash flows to be settled – mortgage receivables 6,997 5,926

Other receivables 8,698 4,983

138,526 58,754

All these receivables have a remaining maturity of less than one year. The item receivables arising from securities sold but not yet delivered can fluctuate on a daily basis in line with movements in the market and the total sise of the number of transactions.

133 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

19. PREPAYMENTS AND ACCRUED INCOME 13,407 15,446

This item comprises:

Commission receivable 6,181 7,484

Other prepayments and accrued income 7,226 7,962

13,407 15,446

The commission receivable comprises the regular commissions as well as performance-related fees. The other prepayments and accrued income item relate primarily to prepaid IT licenses and other service related contracts.

20. FUNDS ENTRUSTED 3,562,200 3,383,507

This item comprises:

Demand deposits in savings accounts 191,058 219,707

Demand deposits in current accounts 3,370,756 3,163,676

Accrued interest* 386 124

3,562,200 3,383,507

* Includes change in presentation, see note 2.5

21. PROVISIONS 3,394 8,134

This item comprises:

Provisions for legal claims 3,149 7,248

Other provisions 245 886

3,394 8,134

The provision for legal claims concerns an estimate of the possible loss suffered by BinckBank as a result of legal proceedings instituted against BinckBank.

The movement in the provisions for legal claims was as follows:

Balance as at 1 January 7,248 8,891

Additions through profit and loss 3,720 1,443

Utilised (6,662) (2,994)

Unused amounts reversed (1,157) (92)

Balance as at 31 December 3,149 7,248

134 FINANCIAL STATEMENTS

The other provisions include provisions formed for onerous contracts. BinckBank expects that the future economic benefits do not outweigh the costs from the relevant contracts. The term of the provision for onerous contracts is less than 2.5 years.

(amounts in € 000’s) 31 December 2018 31 December 2017

The movement in the other provisions was as follows:

Balance as at 1 January 886 -

Additions through profit and loss 116 886

Utilised (757) -

Unused amounts reversed through profit and loss - -

Balance as at 31 December 245 886

22. OTHER LIABILITIES 28,040 52,084

This item comprises:

Liabilities in respect of securities transactions not yet settled 16,683 39,369

Tax and social security contributions 5,012 3,681

Trade payables 4,006 3,740

Other liabilities 2,339 5,294

28,040 52,084

The item liabilities in respect of securities transactions not yet settled can fluctuate on a daily basis in line with movements in the market and the total number of transactions.

23. ACCRUED LIABILITIES 11,773 8,927

This item comprises:

Employee expenses 6,052 5,533

Other accruals and deferred income 5,721 3,394

11,773 8,927

The employee expenses item includes accruals for holiday allowance, unused holiday leave and performance-related remuneration.

135 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

24. EQUITY 403,384 394,889

This item comprises:

Issued share capital 6,750 6,750

Share premium reserve 343,565 343,565

Treasury shares (4,081) (4,282)

Fair value reserve - 492

Retained earnings 57,150 47,431

Non-controlling interests - 933

403,384 394,889

Issued share capital 6,750 6,750

Number Amount Number Amount

Balance as at 1 January 67,500,000 6,750 71,000,000 7,100

Cancelled treasury shares - - (3,500,000) (350)

Balance as at 31 December 67,500,000 6,750 67,500,000 6,750

A total of 67,500,000 ordinairy shares were in issue, each with a nominal value of € 0.10. The share capital is fully paid up. Stichting Prioriteit Binck holds 50 priority shares, each with a nominal value of € 0.10.

(amounts in € 000’s) 31 December 2018 31 December 2017

Share premium reserve 343,565 343,565

Balance as at 1 January 343,565 361,379

Cancelled treasury shares - (17,814)

Balance as at 31 December 343,565 343,565

The share premium is exempt from tax and freelydistributable.

Treasury shares (4,081) (4,282)

Number Amount Number Amount

Balance as at 1 January 767,419 (4,282) 5,281,525 (29,468)

Issued to Executive Board and employees (35,935) 201 (56,985) 318

Issued to third parties - - (957,121) 5,340

Cancelled treasury shares - - (3,500,000) 19,528

Balance as at 31 December 731,484 (4,081) 767,419 (4,282)

136 FINANCIAL STATEMENTS

At the end of 2018, the carrying amounts of the treasury shares was measured at the average purchase price of € 5.58. The movements in the amounts of treasury shares purchased and sold are recognised under equity. At the end of 2018 the quoted share price was € 6.09 (2017: € 4.43).

(amounts in € 000’s) 31 December 2018 31 December 2017

Fair value reserve - 492

The reserve comprises the fair value gains and losses, after tax, on available-for-sale financial assets.

This item comprises:

Unrealised profits - 1,432

Unrealised losses - (776)

Tax on unrealised profits and losses - (164)

- 492

The movements in the fair value reserve were as follows:

Balance as at 31 December prior year 492 1,021

IFRS 9 transition adjustment (492) -

Balance as at 1 January - 1,021

Movement in fair value - (645)

Tax on the movement in fair value - 116

Balance as at 31 December - 492

This reserve comprises the movement in fair value of the available-for-sale financial assets, net of taxes. This item has been reclassified as a result of the implementation of IFRS 9.

Retained earnings 57,150 47,431

Balance as at 31 December prior year 47,431 55,537

IFRS 9 transition adjustment (1,440) -

Balance as at 1 January 45,991 55,537

Payment of final dividend (15,356) (12,679)

Payment of interim dividend (8,680) (2,002)

Grant of rights to shares 216 92

Shares granted to Executive Board and employees (201) (318)

Shares issued to third parties - (806)

Cancelled treasury shares - (1,364)

Result for the year 35,180 8,971 Balance as at 31 December 57,150 47,431

As a result of the introduction of IFRS 9, the opening balance of the retained earnings for 2018 has been adjusted by € 1.4 million. This primarily concerns the initial post tax adjustment for expected credit loss provisions.

137 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

Non-controlling interests - 933

Balance as at 1 January 933 1,383

Divestment of non-controlling interests (1,215) -

Result attributable to non-controlling interests 282 (450)

Balance as at 31 December - 933

The non-controlling interest was related to the 60% interest in Think ETF Asset Management. This interest was sold in 2018, as a result of which BinckBank no longer has control and the interest has been derecognised. This has also resulted in the reduction of the non-controlling interest to zero.

138 FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED INCOME STATEMENT

(amounts in € 000’s) 2018 2017

25. NET INTEREST INCOME 32,070 30,039

This includes all income and expense items relating to the lending and borrowing of money, providing they are of a similar nature to interest, as well as interest income on credit balances or interest expense on overdrafts.

This item comprises the following:

Interest income

Investments at amortised cost 4,370 -

Available-for-sale financial assets - 2,500

Held-for-trading financial assets - 2,283

Loans and receivables 36,751 31,535

Other interest income 120 121

41,241 36,439

Interest expense

Central banks 4,922 4,022

Financial institutions 2,137 1,674

Funds entrusted 1,037 503

Interest rate swaps 1,073 155

Other interest expense 2 46

9,171 6,400

As a result of the continuing low, and even negative, interest rates on balances with credit institutions and the ECB BinckBank is, on balance, paying interest on these assets. Interest paid on funds held by BinckBank due to negative interest rates is recognised under interest expenses.

All interest income from the investments at amortised cost and the loans and receivables are based on the effective interest rates, with the exception of penalty interest on early repayments from loans and receivables. The other interest income is not based on the effective interest rates.

The recognised interest income on laons and receivables in stage 3 of credit risk amounts to € 32 thousand (2017: € 19 thousand).

139 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

26. NET FEE AND COMMISSION INCOME 102,975 105,858

Net fee and commission income comprises fees for services as performed for and by third parties in respect of securities transactions and related services.

This item comprises:

Fee and commission income

Commission income 89,984 94,691

Asset management fees 9,632 14,137

Other fee and commssion income 19,977 16,011

119,593 124,839

Fee and commission expense

Costs of securities transactions 13,723 16,056

Asset management fees 975 1,114

Other fee and commission expenses 1,920 1,811

16,618 18,981

27. RESULT FROM FINANCIAL INSTRUMENTS 7,013 6,150

This item comprises:

Result from fair value hedge accounting 470 73

Result from turbos 6,543 5,729

Result from other financial instruments - 348

7,013 6,150 The result from financial instruments arises from the valuation of the derivatives, hedge accounting and financial instruments at fair value through the P&L. Derivatives are used to hedge market risks on products offered to customers. BinckBank does not have a trading portfolio in which there is active trading in order to achieve results from value movements.

(amounts in € 000’s) 2018 2017

Result from fair value hedge accounting

Interest rate swaps (2,065) 353

Fair value adjustment hedged item 2,535 (280)

470 73

The result from fair value hedge accounting is a result of the ineffective portion of the hedge accounting relationship. BinckBank has entered into a cooperation agreement with UBS for the turbos it has issued, whereby the latter bears the market risk. The revenues depend on the financing level of the turbos issued. In the fair value of the turbos a haircut has been applied to the valuation of the turbo products relating to credit risk. The other results from financial instruments contains the movement in the revaluation of the receivable on DNB in respect of the Deposit Guarantee Scheme – DSB Bank which was settled in 2017.

140 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

28. IMPAIRMENT LOSSES FINANCIAL INSTRUMENTS (207) (92)

This item consists of the movement in the provision for expected credit loss on financial assets valued at amortised cost, such as receivables from (central) banks, investments, loans and receivables, write offs and collection of assets written off in the past.

Cash and balances at central banks 30 -

Due from Banks (14) -

Investments at amortised cost 50 -

Loans and receivables (201) (96)

Write-offs/recoveries (72) 4

(207) (92)

For a further explanation of the expected credit loss, reference is made to note 41.5 on credit risks.

29. OTHER OPERATING INCOME 943 7,014

This item comprises:

IT services – net result 368 7,248

Other revenues 575 (234)

943 7,014

In 2017, revenues from the former subsidiary Able were included in the IT services item. Other revenues includes fees for subscriptions, currency results, and other income and expense items that cannot be accounted for under other items.

30. EMPLOYEE EXPENSES 48,905 53,048

This item comprises:

Salaries 34,234 37,591

Social security contributions 5,909 5,960

Pension contributions 2,379 2,702

Annual bonus and other performance related pay 2,109 1,565

Other employee expenses 4,274 5,230

48,905 53,048

(in numbers) 2018 2017

Number of employees (including members of the board)

Average during the financial year (FTE) 557 631

End of the financial year (headcount) 597 631

141 FINANCIAL STATEMENTS

REMUNERATION OF THE BOARD More detailed information about the policy governing the remuneration of the members of BinckBank’s Executive Board and Supervisory Board is enclosed in the remuneration section of the Annual Report, on page 81.

Employee expenses includes the following in relation to associated parties (Executive Board and Supervisory Board):

(amounts in € 000’s) 2018 2017

Salaries 1,703 1,703

Social security contributions 32 30

Pension costs 50 42

Performance-related pay 234 103

Remuneration of Supervisory Board 223 213

2,242 2,091

FIXED REMUNERATION OF THE BOARD The fixed remuneration of the board is as follows: Pension Total fixed Fixed gross salary contribution remuneration

Fixed remuneration 2018

V.J.J. Germyns 630 14 644

E.J.M. Kooistra 563 22 585

S.J. Clausing 510 14 524

Total 1,703 50 1,753

Fixed remuneration 2017

V.J.J. Germyns 630 10 640

E.J.M. Kooistra 563 20 583

S.J. Clausing 510 12 522

Total 1,703 42 1,745

VARIABLE REMUNERATION POLICY BinckBank has a remuneration policy that is based on the Restrained Remuneration Policy Regulations (Financial Supervision Act) 2017 and the provisions pursuant to the Remuneration Policy (Financial Enterprises) Act as included in the Financial Supervision Act. In 2018, employee expenses of € 216 thousand were recognised (2017: € 92 thousand) relating to the fair value of the variable remuneration in shares for the performance year. The fair value of shares to be allocated in the future is equal to the fair value at the time of measurement adjusted for:

• ‘Missed’ dividends, by discounting the value of the shares by a dividend yield; • The lock-up period, by adjusting the value for the value of an American call option, calculated using a binomial tree.

142 FINANCIAL STATEMENTS

The parameters used in the calculation of the fair value of the variable performance pay payable in shares are stated below.

2018 2017

Share price on vesting date € 6.09 € 4.43

Volatility 20.1% 37.1%

Dividend yield 5.9% 4.2%

Risk-free interest rate 0.87% 0.57%

Average fair value of share price € 5.00 € 3.33

The projected volatility is estimated on the basis of the historical daily price fluctuations in BinckBank shares. The dividend yield is determined by dividing the dividend in the previous financial year (interim and final) by the share price at the end of the previous financial year.

The total variable remuneration for the Executive Board and Identified Staff is shown in the tables below. Remuneration Remuneration Total variable (amounts in € 000’s) in cash in shares performance pay

Variable remuneration 2018

V.J.J. Germyns 43 44 87

E.J.M. Kooistra 39 38 77

S.J. Clausing 35 35 70

Other 99 98 197

Total 216 215 431

Variable remuneration 2017

V.J.J. Germyns 19 19 38

E.J.M. Kooistra 17 17 34

S.J. Clausing 15 16 31

Other 80 - 80

Total 131 52 183

The variable remuneration paid in shares is converted at the closing share prices at the end of the relevant performance year, whereby account is taken of any value-reducing effects.

The following tables list the amounts paid and future payments in shares and cash to the Executive Board and Identified Staff. In 2018, no claw-back was applied to paid variable performance pay. On the definitive allocation of shares in 2017, the number of shares were adjusted to the extent that where the individual allocation was lower than a threshold amount of € 10 thousand the rewards were paid in cash. The statement of movements 2017 was adjusted accordingly. The following tables are included on the basis of projected payments and distributions. The figures in the tables present the amounts and number of shares for the period in which the officer was a member of the Executive Board or was classified as Identified Staff.

143 FINANCIAL STATEMENTS

Shares still to Shares still to be issued per Shares Shares be issued per (in numbers) 1 January issued granted 31 December

Movements 2018

V.J.J. Germyns 17,133 (9,360) 8,701 16,474

E.J.M. Kooistra 16,055 (9,084) 7,785 14,756

S.J. Clausing 6,887 (3,102) 7,043 10,828

Other 22,904 (14,389) 19,552 28,067

Total 62,979 (35,935) 43,081 70,125

Movements 2017

V.J.J. Germyns 21,537 (10,158) 5,754 17,133

E.J.M. Kooistra 21,345 (10,438) 5,148 16,055

S.J. Clausing 4,373 (2,144) 4,658 6,887

Other 57,149 (34,245) - 22,904

Total 104,404 (56,985) 15,560 62,979

(in numbers) 2018 2017

Issued shares in lock-up period

V.J.J. Germyns 16,831 21,494

E.J.M. Kooistra 19,522 25,005

S.J. Clausing 5,246 2,405

Other 23,408 45,272

Total 65,007 94,176

(amounts in € 000’s) 2018 2017

31. DEPRECIATION AND AMORTISATION 5,118 26,792

This item comprises the following:

Intangible assets 1,317 22,908

Property, plant and equipment 3,801 3,884

5,118 26,792

144 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

32. OTHER OPERATING EXPENSES 61,345 61,746

This item comprises the following:

Marketing 14,716 14,525

ICT expenses 9,204 10,086

Audit and professional services 17,062 15,917

Housing 2,034 2,363

Communication and information 7,829 9,785

Costs and contribution to banking supervision 3,767 3,518

Miscellaneous overheads 6,733 5,552

61,345 61,746

The miscellaneous overheads includes office costs, banking costs, insurance, service expenses on mortgage receivables and movements in provisions.

33. SHARE OF RESULTS IN ASSOCIATES 8,436 864

This item comprises:

Result of sale of Able Holding B.V. (incl. earn out) 325 1,883

Result of sale of Think ETF Asset Management B.V. 8,111 -

TOM Holding N.V. - (1,019)

8,436 864

ABLE HOLDING In 2017 BinckBank sold its 100% stake Able Holding B.V. A conditional earn-out arrangement was agreed which resulted in a pay-out in 2018 and accordingly in a revenue.

THINK ETF ASSET MANAGEMENT On June 29, 2018, the sale of the 60% stake in Think ETF Asset Management B.V. was completed. As a result of the sale BinckBank lost control and as a result, the assets, liabilities and results have been deconsolidated as from that date. The contribution to the proceeds and the result of the activities for the period up to the sale is not material and therefore not presented separately. The final amount received from the sale resulted in a book profit of € 8.1 million. The direct transaction- related costs have been fully accounted for in the result.

TOM HOLDING In 2017, the associate TOM Holding N.V. had ceased its activities and the management and shareholders had decided to liquidate the entity. In 2018 the receivables and debts have been settled and the entity has ceased to exist. In 2018, TOM Holding N.V. no longer contributed to the result.

145 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

34. EARNINGS PER SHARE

The basic earnings per ordinary share are calculated by dividing the earnings attributable to ordinary shareholders for the period by the weighted average number of shares outstanding during the period.

The calculation of the earnings per share is based on the following:

Result attributable to shareholders of BinckBank N.V. 35,180 8,971

Number of shares in issue on 1 January 67,500,000 71,000,000

Less: repurchased shares on 1 January (767,419) (5,281,525)

66,732,581 65,718,475

Weighted average number of shares relating to*:

Issued to Executive Board and employees 24,681 39,138

Issued to third parties - 715,211

Repurchased shares - -

Average number of shares in issue 66,757,262 66,472,824

* The figures presented above are based on the total figures disclosed in note 24, taking account of the date of movement in equity.

Earnings per share (in €) 0.53 0.13

There are no rights outstanding that could lead to a dilution of earnings per share. The diluted earnings per share are therefore the same as the basic earnings per share, and consequently are no longer separately disclosed in these financial statements. No other transactions in ordinary shares or potential ordinary shares that could lead to a dilution were conducted between the reporting date and the date of completion of these financial statements.

146 FINANCIAL STATEMENTS

OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

35. DIVIDEND DISTRIBUTED AND PROPOSED

Declared and paid during the year

Dividend on ordinary shares:

Final dividend for 2017: € 0.23 (2016: € 0.19) 15,356 12,679

Interim-dividend for 2018: € 0.13 (2017: € 0.03) 8,680 2,002

24,036 14,681

Proposed for approval by the general meeting of shareholders (not recognised as a liability as at 31 December)

Dividend on ordinary shares:

Final dividend for 2018: € nil (2017: € 0.23) - 15,525

36. RELATED PARTY DISCLOSURES

The consolidated financial statements include the following BinckBank related parties:

Interest Interest year-end year-end Main activity Country 2018 2017

Consolidated companies:

Bewaarbedrijf BinckBank B.V. Securities custody Netherlands 100% 100%

Think ETF Asset Management B.V. Investment management (untill 1 July 2018) Netherlands 0% 60%

Associates:

TOM Holding N.V. Liquidated in 2018 Netherlands 0% 25.8%

The group of related parties consists of consolidated entities and associates. The interest shown above is equal to the voting rights held in relation to the company concerned. Furthermore the Executive Board and Supervisory Board of BinckBank are identified as related parties.

147 FINANCIAL STATEMENTS

TRANSACTIONS WITH RELATED PARTIES Transactions with related parties are conducted on commercial terms and conditions and at market rates. At the end of 2018, BinckBank did not recognise any bad debt provision for receivables from related parties (2017: nil). The need for such provisions is made each year on the basis of an assessment of the financial position of the related party and the markets in which it operates. No guarantees have been issued or received with regard to related parties. Transactions with consolidated entities are fully eliminated in the consolidated financial statements.

Bewaarbedrijf BinckBank B.V. No related party transactions took place in 2018.

Think ETF Asset Management B.V. BinckBank sold its 60% interest in Think ETF Asset Management on 29 June 2018. As from this date Think ETF Asset Management is no longer regarded as a related party.

TOM Holding N.V. TOM Holding N.V was liquidated in 2018.

Executive Board and Supervisory Board No transactions involving the Executive Board or the Supervisory Board took place during the year other than arising from a contract of employment or contract of services. No loans were granted to the Executive Board or Supervisory Board in 2018. See note 30, Employee expenses, and the summary of the remuneration report in the Annual Report for further information.

(amounts in € 000’s) 31 December 2018 31 December 2017

37. COMMITMENTS AND CONTINGENT LIABILITIES

Contingent liabilities

Liabilities in respect of contracts of suretyship and guarantees 106 774

Liabilities in respect of irrevocable facilities

Undrawn credit facilities 10,795 18,638

SURETYSHIPS AND GUARANTEES To meet the needs of its customers, BinckBank offers loan related products, such as contracts of suretyship and guarantees. The underlying value of these products is not recognised as assets or liabilities in the statement of financial position. The above figure represents the maximum potential credit risk for BinckBank related to these products on the assumption that all its counterparties should default on their contractual obligations and all existing collateral should prove worthless. Guarantees include both credit-substituting and non-credit-substituting guarantees. In most cases, guarantees can be expected to expire without a call being made on them and they will not give rise to any future cash flows.

LOAN COMMITEMENTS This relates to the obligations pursuant to mortgage quotations issued.

ALEX BOTTOM-LINE With the acquisition of Alex Beleggersbank at the end of 2007, BinckBank also acquired the Alex Bottom-Line product, which is an agreement with the Dutch Investors’ Association (VEB). If BinckBank terminates this agreement then it will be liable to pay an amount equal to the custody fee and dividend commission paid by each customer of Alex Bottom-Line on entry into the agreement, plus the amount of any custody fee and dividend commission additionally paid by each customer on exceeding set limits.

LEASE COMMITMENTS BinckBank has leases and service contracts for office premises in the Netherlands, Belgium, France, Spain, and Italy. It has also entered into operating lease contracts for the vehicle fleet and other contracts that are for periods of less than five years.

148 FINANCIAL STATEMENTS

The remaining maturity of the outstanding liabilities is as follows:

(amounts in € 000’s) 31 December 2018 31 December 2017

Within one year 3,059 4,445

One to five years 2,812 4,425

Longer than five years 946 1,352

LEGAL PROCEEDINGS BinckBank is involved in various legal proceedings. Although it is not possible to predict the outcome of current or impending lawsuits, the Executive Board is of the opinion – on the basis of information currently available and after taking legal counsel – that the outcomes are unlikely to have material adverse effects on BinckBank’s financial position or results, other than cases that have already given cause to the formation of a provision.

INTERNATIONAL SERVICES UNDER FOREIGN LAW BinckBank procures international services from suppliers that may be subject to foreign law, which gives cause to an inherent risk of differences in interpretation. The Executive Board is of the opinion that although the outcome of discussions on any such differences in interpretation that may arise is uncertain, there is no reason at present to assume that this could have material adverse effects on BinckBank’s financial position or results.

ALL-CASH PUBLIC OFFER FROM SAXO BANK On 17 December 2018, BinckBank N.V. and Saxo Bank A/S announced that they had reached conditional agreement on a recommended all-cash public offer of € 6.35 (cum dividend) per issued and outstanding ordinary share and priority share in BinckBank. For the purpose of this agreement, BinckBank hired external consultants. Certain conditions have been laid down in the agreements with Saxo Bank and the external advisers that could have financial consequences for BinckBank in the event of the success or failure of the transaction. A termination fee has been agreed in the merger protocol with Saxo Bank. If the merger protocol is terminated by Saxo Bank because the management board and/or the Supervisory Board of BinckBank have withdrawn their recommendation of Saxo Bank’s bid or have revised them negatively, or if the merger protocol is terminated by BinckBank because a superior competitive bid has been announced or issued, BinckBank will forfeit a termination fee of € 4.3 million to Saxo Bank. If the merger protocol is terminated because the regulatory clearances have not been obtained by 1 April 2020, Saxo Bank will forfeit a termination fee of € 4.3 million to BinckBank.

As part of Saxo Bank’s bid, BinckBank expects to incur additional costs for external suppliers. Contracts with the external suppliers can contain fees which in some cases are conditional on completion of the transaction. Assuming that the transaction is completed, BinckBank expects to incur costs between € 2.5 and € 3.5 million in the period up to the completion of the transaction.

If the offer is declared unconditional and after settlement of the transaction, working out the details of the acquisition and the associated integration of processes may lead to the redundancy of BinckBank employees. In the merger protocol with Saxo Bank, agreement has been reached on the principles and starting points of a social plan which still has to be drafted. As of settlement, a social plan will be effective for at least three years, applicable to employees with an employment agreement with BinckBank at the time of announcement who become redundant or are confronted with a fundamental change in function as a result of changes in the organisation that arise from (the preparation of) the integration of the BinckBank organisation into the Saxo Bank group. In addition, insofar as necessary subject to approval by DNB, retention packages can be offered to selected employees to ensure their motivation and commitment and the ongoing continuation of the company after the transaction has been effected. The basic principles of the social plan and the retention package have been coordinated between Saxo Bank, BinckBank and the BinckBank works council. A reliable estimate of the contingent liabilities arising from the above that BinckBank has vis-à-vis the staff cannot be reliably estimated at this time but are expected to have a material impact on the financial results of BinckBank.

38. Post balance sheet events

No events took place after balance sheet date that would result in material adjustments.

149 FINANCIAL STATEMENTS

39. Classification of assets and liabilities by expected maturity

The table below shows the assets and liabilities classified by expected remaining life to maturity.

(amounts in € 000’s) < 12 months > 12 months Total

31 December 2018

ASSETS

Cash and balances with central banks 1,096,838 - 1,096,838

Due from Banks 134,675 - 134,675

Derivatives 48 24,229 24,277

Financial assets at fair value through profit or loss 13,721 - 13,721

Investments at amortised cost 247,805 785,785 1,033,590

Loans and receivables 620,554 789,095 1,409,649

Intangible assets - 157,214 157,214

Property, plant and equipment - 32,006 32,006

Current tax assets 16,622 - 16,622

Deferred tax assets 468 - 468

Other assets 138,526 - 138,526

Prepayments and accrued income 13,407 - 13,407

Total assets 2,282,664 1,788,329 4,070,993

LIABILITIES

Due to banks 5,274 - 5,274

Derivatives 781 25,978 26,759

Financial liabilities at fair value through profit and loss 161 - 161

Funds entrusted 3,562,200 - 3,562,200

Provisions 3,342 5 2 3,394

Current tax liabilities 12 - 12

Deferred tax liabilities - 29,996 29,996

Other liabilities 26,817 1,223 28,040

Accrued liabilities 11,773 - 11,773

Total liabilities 3,610,360 57,249 3,667,609

Net (1,327,696) 1,731,080 403,384

150 FINANCIAL STATEMENTS

(amounts in € 000’s) < 12 months > 12 months Total

31 December 2017

ASSETS

Cash and balances with central banks 1,003,537 - 1,003,537

Due from Banks 133,968 - 133,968

Derivatives 18 37,293 37,311

Financial assets at fair value through profit or loss 16,613 - 16,613

Available-for-sale financial assets 257,642 539,652 797,294

Held-to-maturity financial assets 203,792 138,398 342,190

Loans and receivables 583,236 720,061 1,303,297

Investments in associates 485 - 485

Intangible assets - 157,950 157,950

Property, plant and equipment - 33,969 33,969

Current tax assets 16,725 - 16,725

Deferred tax assets 6,279 - 6,279

Other assets 58,754 - 58,754

Prepayments and accrued income 15,446 - 15,446

Total assets 2,296,495 1,627,323 3,923,818

LIABILITIES

Due to banks 2,538 - 2,538

Derivatives 99 36,956 37,055

Financial liabilities at fair value through profit or loss 231 - 231

Funds entrusted 3,383,507 - 3,383,507

Provisions 8,134 - 8,134

Current tax liabilities 10 - 10

Deferred tax liabilities 164 36,279 36,443

Other liabilities 50,882 1,202 52,084

Accrued liabilities 8,927 - 8,927

Total liabilities 3,454,492 74,437 3,528,929

Net (1,157,997) 1,552,886 394,889

151 FINANCIAL STATEMENTS

40. Segmentation overview

A segment is a clearly distinct component of BinckBank that provides services with a risk or return profile that is different from the other segments (a business segment), or which provides services to a particular economic market (market segment) that has a different risk and return profile to that of other segments. From an organisational perspective, the operations of BinckBank are primarily segmented in terms of the countries in which BinckBank is active. The Executive Board determines the performance targets, and authorises and monitors the budgets prepared for these business segments. The management of the business segment is responsible for setting policy for that segment, in accordance with the strategy and performance targets formulated by the Executive Board. At 31 December 2018, the business segments are as follows:

• The Netherlands • Belgium • France • Italy • Group operations

All income and expenses are attributed to the geographical areas on the basis of the operations carried out by the offices. In all countries, this relates to the activities as online broker in financial instruments for the private customer market, inclusive of the associated savings products. Professional Services are also included in the Netherlands and Belgium. The segment The Netherlands also includes asset management services and the issue of financial instruments. All directly attributable income and expenses are recognised within the aforementioned geographical segments, together with the attributed costs of the Group operations.

Group operations includes the departments under the direct management of the Executive Board and for which the income and expenses are not directly included in one of the other business segments. This includes the expenses of the central ICT, operating, and staff departments. In addition, all results from the interest in Think ETF Asset Management B.V. (until the time of the sale) are recognised under Group operations. The allocation of Group operations to the geographical segments is based on an allocation key agreed in advance.

The same accounting policies are used for a business segment as those described for the consolidated statement of financial position and income statement of BinckBank. The amounts the various business segments charged each other have been eliminated and replaced by the allocation of the actual costs.

Investments in intangible assets and property, plant, and equipment are attributed to the business segments to the extent that the investments are directly acquired by the business segments. All other investments are recognised under Group operations.

Tax is managed at group level and for the segment summary is not attributed to the segments.

In both 2018 and 2017, no customer or group of associated customers was responsible for more than 10% of the bank’s total income.

The following analysis shows the geographical distribution of income from operating activities and the property, plant and equipment and intangible assets of BinckBank. Income is allocated on the basis of the country of domicile of the branch where the account is opened, and the property, plant and equipment and intangible assets on the basis of the country in which the assets are held.

152 FINANCIAL STATEMENTS

Consolidated 2018

Nether- Group (amounts in € 000’s) lands Belgium France Italy activities Total

INCOME STATEMENT

Net interest income 26,039 1,572 2,566 1,893 - 32,070

Net fee and commission income 76,549 13,557 7,234 3,935 1,700 102,975

Result from financial instruments 5,602 941 - - 470 7,013

Credit losses from financial assets (237) (14) (27) (2) 73 (207)

Other income 437 - 22 - 484 943

Total income from operating activities 108,390 16,056 9,795 5,826 2,727 142,794

Employee expenses 8,822 2,992 3,744 1,708 31,639 48,905

Depreciation and amortisation 873 80 30 9 4,126 5,118

Other operating expenses 19,000 5,737 5,955 2,368 28,285 61,345

Total operating expenses 28,695 8,809 9,729 4,085 64,050 115,368

Result from operating activities 79,695 7,247 66 1,741 (61,323) 27,426

Internal cost allocation (39,828) (7,314) (5,759 ) (4,567) 57,468 -

Result from operating activities 39,867 (67) (5,693) (2,826) (3,855) 27,426 after internal cost allocation

Share in results of associates 8,436

Result before tax 35,862

Tax (400)

Net result 35,462

Tangible and intangible assets 155,958 237 141 2 32,882 189,220

Total assets 2,971,261 632,520 246,820 166,537 53,855 4,070,993

Total liabilities 2,641,623 615,645 238,494 160,843 11,004 3,667,609

153 FINANCIAL STATEMENTS

Consolidated 2017

Nether- Group (amounts in € 000’s) lands Belgium France Italy activities Total

INCOME STATEMENT

Net interest income 23,909 2,101 2,378 1,659 (8) 30,039

Net fee and commission income 82,372 11,615 6,193 2,880 2,798 105,858

Result from financial instruments 4,923 806 - - 421 6,150

Credit losses from financial assets (21) (1) (29) 3 (44) (92)

Other income 1,365 1 14 - 5,634 7,014

Total income from operating activities 112,548 14,522 8,556 4,542 8,801 148,969

Employee expenses 10,151 2,794 3,519 1,389 35,195 53,048

Depreciation and amortisation 22,211 52 20 20 4,489 26,792

Other operating expenses 18,124 6,293 4,792 2,179 30,358 61,746

Total operating expenses 50,486 9,139 8,331 3,588 70,042 141,586

Result from operating activities 62,062 5,383 225 954 (61,241) 7,383

Internal cost allocation (49,201) (7,330) (5,660) (4,420) 66,611 -

Result from operating activities 12,861 (1,947) (5,435) (3,466) 5,370 7,383 after internal cost allocation

Share in results of associates 864

Result before tax 8,247

Tax 274

Net result 8,521

Tangible and intangible assets 156,749 339 131 11 34,689 191,919

Total assets 2,909,844 560,857 244,475 151,527 57,115 3,923,818

Total liabilities 2,581,477 549,268 237,921 147,927 12,336 3,528,929

154 FINANCIAL STATEMENTS

41. Risk management

The Executive Board of BinckBank, as a financial institution, is aware of the importance of risk management to the Bank and assigns risk management an important role in the overall management of the organisation.

Risk management supports all stakeholders to ensure the bank’s risks are managed and are within the limits of the risk appetite and legal requirements. This chapter describes the risk appetite, organisational, and governance requirements applicable in risk management and the principal of the three lines of defence. After discussion of these general arrangements, the chapter continues with a description of the capital requirements in accordance with Pillar I and Pillar II of the CRR framework. The chapter concludes with the individual risk types BinckBank is exposed to and the way in which the risks are managed.

41.1 RISK APPETITE Risk appetite is the balance between risk and return and is a core element of BinckBank’s business operations. Solid capital and liquidity ratios are essential conditions for a successful proposition to our customers, which is reflected in the risk appetite. Each year the Executive Board draws up a proposal for the risk appetite, which is then reviewed and approved by the Supervisory Board. The risk appetite is monitored by means of a risk dashboard. This sets quantitative standards for the assessment of whether BinckBank has remained within its own risk appetite. Key Risk Indicators (KRI) and Key Performance Indicators (KPI) are included in this dashboard and represent BinckBank’s risk profile as closely as possible. Monthly monitoring in the governance committees makes it possible to make timely adjustments and keep the current risk profile within accepted risk appetite parameters.

The risk appetite is based on the following guiding principles:

41.2 RISK GOVERNANCE Efficient and effective risk management is vital to pursuing BinckBank’s strategy. The risk management framework with the accompanying policy and systems is continuously improved and adapted to changes in the external setting and the internal organisation. Operational control measures have been described in detail and the effectiveness of these measures is assessed periodically.

GOVERNANCE STRUCTURE AND THREE LINES OF DEFENCE BinckBank operates according to the Three Lines of Defence principle (3LoD). The 3LoD concept goes further than organisational structure and the designation of roles. BinckBank regards this as a form of operating, cooperating, and thinking, which is also the foundation of the risk culture. The first line in this structure is formed by operational management and support units that are responsible and accountable for the evaluation, management and mitigation of risks. The first line departments are advised and monitored by second-line specialised departments: Governance, Risk & Compliance (GRC), Finance & Control, and Legal & Regulatory. These departments are also responsible for managing risk management-related policy, processes, and methodologies. The Internal Audit Department (IAD) forms the third line of defence that provides additional security to the Executive Board and the Supervisory Board by means of a risk-based approach. The Executive Board is responsible for effectively setting up and managing the governance risk compliance framework. This framework enables the Executive Board to formulate and monitor the risk appetite and to effectively perform risk management and internal control. The Supervisory Board and its subcommittees (the audit committee, risk and product development committee, and remuneration committee) together with the external auditor form the last link in the governance risk compliance framework.

155 FINANCIAL STATEMENTS

SUPERVISORY BOARD Risk and Product Remuneration Committee Audit Committee Development Committee (RemCo) (AC) (RPC) EXECUTIVE BOARD Ris Reneation eal sset iailit oliane nestent itete ontol ontin Relato Dislose oittee oittee oittee Data Boad oittee oittee oittee oittee

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eal dit on PPRT DPRTT › Management control Relato st and nd line Quality

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Resoes sot (2 › Risk reporting (1st line) reporting

1ST LINE ‘OF DEFENCE’ 2ND LINE ‘OF DEFENCE’ 3RD LINE ‘OF DEFENCE’

Supervisory Board The Supervisory Board monitors the risks and capital requirements regarding the operations of the bank and the composition of the portfolio. For this purpose, the Supervisory Board has set up three subcommittees that are explained in more detail in the following table:

SUBCOMMITTEES OF THE SUPERVISORY BOARD OBJECTIVE FOCUS AREA

Risk and Product The Risk and Product Development Committee addresses issues relating • Credit risk Development Committee to the credit risk, market risk, interest risk, solvency and liquidity risk and • Market risk operational risk. It also advises the Supervisory Board on matters including • Interest-rate risk the risk profile and the risk appetite of BinckBank. It further tests whether new • Solvency risk products or changes to existing products, systems, and services comply with • Liquidity risk the risk appetite and the duty of care to the client. • Operational risk • Investment policy on discretionary asset management products • Data and information risk

Remuneration Committee The RemCo advises the Supervisory Board on matters including the • Staff and (RemCo) remuneration of the Executive Board and advises on the remuneration remuneration of designated persons within the senior management (identified staff) and employees in the control functions.

Audit Committee (AC) The Audit Committee is responsible for overseeing the design and operation • Financial reporting of the internal control system and risk management measures, and for and disclosure risk monitoring the implementation of the external auditor’s recommendations • Compliance risk and the functioning of the IAD. • Legal risks

156 FINANCIAL STATEMENTS

Executive Board The Executive Board is responsible for formulating and implementing the strategy of the bank. This includes, inter alia, the capital and funding plan, which is based on the risk and capital policy. The Executive Board is also responsible for the correct performance of the processes that assure the liquidity and capital position of the bank. In addition, the Executive Board is obliged to provide information to the Supervisory Board, which in turn assesses the bank’s risk appetite. Decisions are taken during board meetings. The Executive Board has set up the following risk subcommittees to assure that the various categories of risks are managed in the appropriate manner:

SUBCOMMITTEES OF THE EXECUTIVE BOARD OBJECTIVE FOCUS AREA

Asset & Liability Committee The ALCO monitors all the risks affecting BinckBank’s balance sheet. The ALCO • Credit risk (ALCO) is mainly concerned with the management of credit risk, market risk (currency • Market risk risk) and the interest-rate risk, and also assesses the adequacy of BinckBank’s • Interest-rate risk liquidity and capital position. This committee also sets the investment policy • Solvency risk for the interest rate business. • Liquidity risk

Risk & Compliance The Risk & Compliance Committee supervises operational and compliance • Operational risk Committee (RCC) risk in the banking business The Committee has important duties in providing • Compliance risk assurances for sound and controlled operations. It further tests whether new • Approval of new products or changes to existing products, systems and services comply with products the risk appetite and the duty of care to the client.

Investment Committee (IC) The Investment Committee supervises the implementation of the investment • Investment policy on policy for the asset management products. The investment committee discretionary asset assesses changes to the investment policy and approves these where management necessary.

Architecture & Data Board The purpose of the Architecture & Data Board is to advise the Executive Board • Data and on the use of data and information and to bring ICT systems and architecture information risk in line with the future strategic direction.

Accounting Committee (AcC) The AcC monitors the financial and disclosure risk. The AcC focuses on the • Financial reporting management of risks associated with accounting processes, accounting and disclosure risk manuals, accounting policies, provisions and the application of new accounting standards (IFRS).

Legal & Regulatory Committee The objective of the Legal & Regulatory Committee is to supervise the timely • Legal risks (LRC) identification of new developments in the relevant legislation and regulations and determine their impact on BinckBank and control the legal risks.

Disclosure Committee The Disclosure Committee supervises the disclosure of price-sensitive • Reporting and information. This committee also supervises the measures implemented in the disclosure risk organisation to treat potentially price-sensitive information as confidential.

ADVISORY COMMITTEE OBJECTIVE FOCUS AREA

Control Committee Each year, on the instructions of the RemCo, the Control Committee performs • Personnel and a risk analysis on the implementation of the remuneration policy and reports remuneration on this to the RemCo. The Control Committee also conducts an annual audit to determine whether the remuneration policy complies with the relevant legislation and regulations and the applicable recommendations.

157 FINANCIAL STATEMENTS

41.3 CAPITAL MANAGEMENT BinckBank’s capital requirement is determined on the basis of the risk appetite and strategy, taking into account the expectations and requirements of external stakeholders. The capital adequacy is monitored constantly and compared with the risk appetite and strategy. The current and future capital adequacy is discussed monthly in the ALCO, where resolutions can be made for taking corrective steps. A capital and funding plan drawn is up annually containing information about the strategic and tactical assumptions, as well as projections of future developments in the capital position. This plan is included in the ICAAP documentation.

BinckBank’s available capital is comprised entirely of core equity Tier 1 capital (CET1). BinckBank does not have any additional Tier 1 capital (AT1) or Tier 2 capital (T2). The CRR includes transitional provisions for various requirements. BinckBank does not take any account of this and adopts the full phase-in as this will prevail in the current financial year when calculating the capital buffer.

(amounts in € 000’s) 31 December 2018 31 December 2017

Issued share capital 6,750 6,750

Share premium 343,565 343,565

Treasury shares (4,081) (4,282)

Fair value reserves - 492

Retained earnings 21,970 38,460

Result for the year 35,180 8,971

Non-controlling interests - 933

Total equity 403,384 394,889

Less: goodwill (153,865) (153,865)

Plus: deferred tax liabilities related to goodwill 29,798 36,064

Less: other intangible assets (3,349) (4,085)

Less: prudent valuation adjustment (2) (788)

Less: non-controlling interests - (933)

Less: deferred tax assets (468) (6,235)

Less: result for year adjusted for interim dividends (26,500) (15,525)

Total available capital – Tier 1 248,998 249,522

158 FINANCIAL STATEMENTS

41.4 CAPITAL RATIO’S The CRD IV and CRR directives are applicable to all banks in the Netherlands. This integral framework for the supervision of banks is comprised of three pillars:

• Pillar 1: External capital adequacy requirements for capital risk, market risk, and operational risk; • Pillar 2: Internal processes relating to risk management and the calculation of internal capital adequacy requirements and economic capital, as well as the manner in which the supervisory authority assesses these internal processes, the Supervisory Review and Evaluation Process (SREP); • Pillar 3: Obligation to provide risk information for external stakeholders.

Pillar 3 concerns the obligation to provide risk information for external stakeholders and supports the determination of the minimum solvency requirements (Pillar 1) and the solvency requirements laid down by management (Pillar 2). The objective of Pillar 3 is to improve the quality of the institution’s risk management through the disciplinary market effect. BinckBank has made its Pillar 3 report available separately on its website (www.binck.com).

Pursuant to the regulations, banks are required to hold sufficient buffer capital to cover the risks arising from banking operations. Pillar 1 provides guidelines for calculating the minimum capital buffer prescribed by the supervisory authorities to cover credit risk, market risk and operational risk. The regulations provide scope for a series of calculation methods for the capital adequacy requirements relating to these risks, which range from relatively simple to more advanced methods. Banks can exercise their discretion, subject to a number of conditions, in electing one of these methods. A number of qualitative requirements are applicable to this selection. Banks that elect a more advanced method may not revert to a simpler method at a later date.

BinckBank uses the standardised methods for calculating the risk-weighted items for credit risk, settlement risk, and operational risk as described in the CRR.

ADDITIONAL CAPITAL BUFFERS Banks are required to maintain a number of additional capital buffers over and above the required capital required capital for credit risks. The following buffers are relevant to BinckBank:

Countercyclical capital buffer The countercyclical capital buffer takes account of the credit cycle and the risks of excessive credit growth in the country in question. The countercyclical capital buffer is a minimum of 0% and a maximum of 2.5% of the relevant risk-weighted items and must be drawn from the company’s core equity Tier 1 capital. The institution-specific countercyclical buffer calculated by BinckBank is currently very low, primarily because the competent authorities in many countries continue to set most of the country-specific countercyclical buffer requirements at nil.

Capital conservation buffer The capital conservation buffer was designed to ensure that banks accumulate additional capital buffers over and above the minimum capital requirements outside stress periods.

The framework reduces the choice of banks that have exhausted their capital buffers to further reduce them by paying generous dividends, thus discouraging them from engaging in ‘unacceptable practices’ such as:

• using recovery forecasts to justify continuing to make generous payments to shareholders. The shareholders, not the savers, should bear the risk that recovery does not materialise; • attempting to use capital allocation as a means of indicating their financial strength.

The capital requirements will be increased in phases each year from 0.625% of the risk items from 2016 to 2.5% in 2019 (2018: 1.875%).

The buffer requirements of the capital conservation buffer at the end of December 2018 total € 14.7 million (2017: € 10.1 million).

159 FINANCIAL STATEMENTS

INTERNAL CAPITAL RATIOS BinckBank also uses an internal capital requirement for determining the amount of capital to be held under Pillar 2. The adequacy of this internal capital requirement is assessed periodically and can lead to higher or lower internal capital requirements. BinckBank uses a minimum internal capital requirement for the Pillar 1 Total Capital Ratio (TCR) of 22.2% and a leverage ratio of at least 3.5%.

LEVERAGE RATIO The leverage ratio is a simple non-risk sensitive standard under which capital is divided by a sum of balance sheet items and off-balance sheet items. The unweighted balance sheet total rose in 2018, due to an increase in funds entrusted.

A summary of BinckBank’s capital requirements and the associated ratios is presented below.

(amounts in € 000’s) 31 December 2018 31 December 2017

CAPITAL RATIOS

Total available capital (A) – Tier 1 248,998 249,522

Credit risk 571,925 581,675

Settlement risk 203 6,455

Operational risk 210,949 221,250

Total risk weighted exposure (B) – Pillar I 783,077 809,380

Capital ratio (=A/B) 31,8% 30,8%

CRR required capital (=B*8%) 62,646 64,750

CRR buffers 14,694 10,117

CRR required capital incl. buffers 77,340 74,868

Required capital based on own internal standard incl. buffers 173,854 149,735

LEVERAGE RATIO

Risk measure for leverage ratio:

Unweighted balance sheet total 4,070,993 3,923,818

Prudential adjustments (123,898) (144,997)

Risk measure (C) 3,947,095 3,778,821

Leverage ratio (=A/C) 6,3% 6,6%

Required capital based on internal standard (3.5%) 138,148 132,259

160 FINANCIAL STATEMENTS

41.5 CREDIT RISK, CREDIT APPROVAL AND CREDIT MANAGEMENT Credit risk is the risk of a counterparty and/or issuing institution that is involved in the trade or issue of a financial instrument defaulting on an obligation and thus harming BinckBank financially. BinckBank’s credit risk can be subdivided into the following categories:

• credit risk on cash and investments; • credit risk on mortgages; • credit risk on outstanding collateralised loans/margin obligations and financial guarantees and (SRD) obligations; and • counterparty risk.

The manner in which BinckBank manages these risks is explained below.

MANAGEMENT OF CREDIT RISK FOR CASH AND INVESTMENT BinckBank deals prudently with the funds entrusted to it by its clients. Funds entrusted that are not used for funding loans are partly held in cash and the remainder is placed in the money market and capital market. All placements are made in a responsible manner in accordance with the established risk appetite. BinckBank’s objective with its investment portfolio, within the issued mandate, is to invest the available liquidity in the market in a manner that optimises the interest margin between the raised and placed funds.

The credit risk on cash and placements is monitored daily by the Treasury & ALM Department. It reports to the CFRO and periodically to the Asset and Liability Committee (ALCO). Cash balances are placed in the money and capital market with central governments, regional governments (if guaranteed by central government), central banks and other credit institutions with a minimum credit rating of single A (Fitch or equivalent) and a stable outlook.

Agreements and limits with regard to placing funds in the money and capital markets are established in a limits system adopted by the ALCO to avoid excessive credit risk concentrations. The Treasury & ALM Department is bound by stringent requirements imposed on funds placed with counterparties. Internally-set limits on both the amount and terms of loans to approved counterparties are observed. BinckBank’s relatively low risk appetite with regard to credit risk is demonstrated by the policy of investing bonds in relatively safe and liquid instruments, most of which are eligible as collateral at the European Central Bank (ECB).

MANAGEMENT OF CREDIT RISK FOR LOANS AND RECEIVABLES The credit appetite risk policy is focused on the monitoring and management of mortgage credit risk, credit risk on collateralised loans, margin obligations and financial guarantees.

Mortgages BinckBank acts as the financier in a collective structure in which the marketing, sales, administration, and management are provided by Dynamic Credit, an AFM-licensed service provider. BinckBank defines its risk appetite within the investment mandate by issuing acceptance criteria and designating one or more credit risk buckets and interest rate reset periods. When viewed from a risk management perspective, the credit risk and outsourcing risk are of particular importance. Appropriate management of the operational risks, including the outsourcing risks, is provided for in the form of agreements laid down in a service level agreement (SLA). These agreements relate primarily to various elements of the mortgage loan process, the management and administration of mortgages issued and the reporting of data. BinckBank reviews compliance with the SLA once a month. Credit acceptance and management of credit risks have been outsourced to Dynamic Credit and are monitored through extensive data on the mortgage portfolio issued within the scope of the statutory requirements. The information received is employed for various purposes including the recognition of any arrears, where relevant.

BinckBank periodically assesses whether the mortgage production lies within its specified limits. BinckBank is in a position to issue a stop notice to terminate the production on its account. The collateral for the mortgages is comprised of a combination of Dutch residential properties with and without a National Mortgage Guarantee (NHG).

161 FINANCIAL STATEMENTS

In July 2016, BinckBank also purchased a portfolio of existing residential mortgages from Obvion. The agreements reached in this instance relate primarily to the management and administration of mortgages loaned and the reporting of data. Appropriate management of the operational risks, including the outsourcing risks, is provided for in the form of agreements laid down in a service level agreement (SLA). BinckBank reviews compliance with the most important agreements in the SLA once a month. The management of the credit risks is monitored on the basis of the comprehensive data on the mortgage portfolio issued in accordance with the prevailing statutory requirements. The information received is employed for various purposes including the recognition of any arrears, where relevant.

All loans of which the interest and/or redemption is not paid in time are in arrears. A provision is formed when a client is deemed unable to fulfil his/her obligations towards the bank then a provision will be formed. The loan extended to the client is then designated as a non-performing loan.

The service providers are entrusted with the arrears management within the agreements laid down in the SLAs. The service provider is entrusted with the responsibility for the initiation of a forbearance programme to renegotiate the credit agreements. The service provider notifies BinckBank of the initiation of any forbearance programme.

Collateralised loans, margin obligations and financial guarantees BinckBank offers customers various forms of lending against securities collateral. This advance funding can be used to cover margin requirements relating to derivative positions, for the purchase of securities, or for the cover of financial guarantees. BinckBank has a potential or actual credit risk in respect of the customer in all cases.

Collateralised loans are automatically assessed at the time that they are advanced, taking account of the haircut percentages for the collateral that qualifies for that purpose. This is all carried out in accordance with the guidelines set by the ALCO, subject to the limits set in Section 152 of the Besluit gedragstoezicht financiële ondernemingen (BGfo, Market Conduct Supervision (Financial Institutions) Decree).

The loans granted are monitored on the basis of real-time prices with automated systems. The credit risk lies in movements in value of the underlying securities collateral. Specific attention is then given to undesirable concentrations in client portfolios, referred to as the ‘concentration risk’. A cover deficit arises when the value of the collateral is insufficient to cover the collateralised loans and/or margin obligations. The client must make up a cover deficit within one to five trading days. When the client fails to comply with this requirement then BinckBank is entitled to wind down the position.

The first-line Credit Risk Management department monitors the outstanding collateralised loans, margin obligations and any excessive concentrations of client portfolios, where relevant. The second-line Risk Management department supervises the Credit Risk Management department.

162 FINANCIAL STATEMENTS

FORBEARANCE Forbearance occurs when a client is no longer able to fulfil his obligations towards BinckBank due to financial difficulties or to financial difficulties to be expected within the near future and the bank, in view of these circumstances, has made concessions on the terms and conditions of the credit agreement that are intended to enable the client to fulfil the revised obligations. These concessions on the existing credit agreement relate to the client’s financial situation and would not have been made if these circumstances had not arisen. For this reason, forbearance is not an issue when amendments of the conditions of the credit agreement are made for reasons other than the client’s financial difficulties.

The objective of the measures implemented in forbearance situations is to maximise the probability of the recovery of the client’s payment capacity and, as a result, minimise the losses incurred in writing down all or part of the loan. The measures then need to offer the client an appropriate and sustainable solution that will ultimately enable the client to fulfil the original obligations pursuant to the credit agreement.

In practice, the forbearance measures do not always achieve the intended result, namely the recovery of the client’s payment capacity or the prevention of a continued decline in payment capacity. This can, for example, be the case when the client’s financial situation continues to deteriorate or an expected improvement in the situation fails to materialise. Any such situations give cause to a new analysis of the client’s general and financial situation and the determination of the revised strategy to be adopted.

A forbearance situation ends when the status ‘non-performing’ has no longer applied to the loan for a period of two years. The ‘non-performing’ status must last a minimum of one year starting from the last forbearance measure. The client must moreover have made significant and regular payments of interest and/or principal during at least half this period. After expiry of the two-year period, no payments by the borrower may be in arrears for more than 30 days.

(amounts in € 000’s) 31 December 2018 31 December 2017

Forbearance

Mortgage receivables with forbearance measures 3,367 1,663

MANAGEMENT OF COUNTERPARTY RISK The Treasury & ALM department effects transactions for BinckBank’s account and risk. This involves counterparty risk. The ALCO approves the counterparty limits. The vast majority of equities transactions effected by BinckBank are for the account and risk of customers (online brokerage). These transactions are mainly effected on regulated or other markets such as NYSE and Euronext, where use is made of a central counterparty (CCP). The counterparty risk for customers is therefore low.

163 FINANCIAL STATEMENTS

RISK CONCENTRATIONS Risk concentrations for financial instruments are identified for the purposes of credit risk management. The following tables give an insight into the various risk concentrations.

Risk concentration by economic sector The following table lists the credit risk by economic sector.

RISK CONCENTRATION BY ECONOMIC SECTOR AS AT 31 DECEMBER 2018 Government/ Other Central Financial Government private (amounts in € 000’s) banks institutions guaranteed Retail sector Total

Cash and balances at central banks 1,096,838 - - - - 1,096,838

Due from banks 34,898 99,777 - - - 134,675

Derivatives - 24,229 - - 48 24,277

Financial assets at fair value - - - - 13,721 13,721 through profit and loss

Investments at amortised cost - 772,981 260,609 - - 1,033,590

Loans and receivables - - - 1,350,897 58,752 1,409,649

1,131,736 896,987 260,609 1,350,897 72,521 3,712,750

Guarantees - - - 3 103 106

Total 1,131,736 896,987 260,609 1,350,900 72,624 3,712,856

RISK CONCENTRATION BY ECONOMIC SECTOR AS AT 31 DECEMBER 2017 Government/ Other Central Financial Government private banks institutions guaranteed Retail sector Total

Cash and balances at central banks 1,003,537 - - - - 1,003,537

Due from banks 32,559 101,409 - - - 133,968

Derivatives - 37,186 - - 125 37,311

Financial assets at fair value - - - - 16,613 16,613 through profit and loss

Available-for-sale financial assets - 762,653 34,641 - - 797,294

Held-to-maturity financial assets - 83,196 258,994 - - 342,190

Loans and receivables - - - 1,244,545 58,752 1,303,297

1,036,096 984,444 293,635 1,244,545 75,490 3,634,210

Guarantees - - - 634 140 774

Total 1,036,096 984,444 293,635 1,245,179 75,630 3,634,984

164 FINANCIAL STATEMENTS

Risk concentration by geographical area The following table lists the credit risk by geographical area.

GEOGRAPHICAL DISTRIBUTION AS AT 31 DECEMBER 2018 Belgium, Supra Nether France, Other EU- North Other (amounts in € 000’s) national lands Italy Germany countries America countries Total

Cash and balances at central banks - 1,093,997 2,841 - - - - 1,096,838

Due from banks - 113,704 13,434 - 70 6,906 561 134,675

Derivatives - - 48 - - - 24,229 24,277

Financial assets at fair value through - - 13,721 - - - - 13,721 profit and loss

Investments at amortised cost 13,128 119,626 154,403 303,511 189,127 165,835 87,960 1,033,590

Loans and receivables - 1,349,756 46,082 5,418 4,122 - 4,271 1,409,649

13,128 2,677,083 230,529 308,929 193,319 172,741 117,021 3,712,750

Guarantees - 3 103 - - - - 106

Total 13,128 2,677,086 230,632 308,929 193,319 172,741 117,021 3,712,856

GEOGRAPHICAL DISTRIBUTION AS AT 31 DECEMBER 2017 Belgium, Supra Nether France, Other EU- North Other national lands Italy Germany countries America countries Total

Cash and balances at central banks - 995,739 7,798 - - - - 1,003,537

Due from banks - 100,218 23,905 - 78 8,994 773 133,968

Derivatives - 274 125 - - - 36,912 37,311

Financial assets at fair value through - - 16,613 - - - - 16,613 profit and loss

Available-for-sale financial assets - 119,027 200,674 30,151 252,144 84,940 110,358 797,294

Held-to-maturity financial assets 12,528 - - 271,360 - 58,302 - 342,190

Loans and receivables - 1,238,245 50,213 6,446 4,122 - 4,271 1,303,297

12,528 2,453,503 299,328 307,957 256,344 152,236 152,314 3,634,210

Guarantees 774 774

Total 12,528 2,454,277 299,328 307,957 256,344 152,236 152,314 3,634,984

165 FINANCIAL STATEMENTS

RISK CONCENTRATION BY CREDIT RATING The assessment of the credit risk of financial assets and liabilities is based on credit ratings provided by rating agencies. Cash and placements with banks are classified on the basis of the short-term credit ratings of rating agencies. The long- term rating is used for the investment portfolio. The loans and receivables relate to credit collateralised with securities and receivables from residential mortgage rights. These are not rated by rating agencies.

FINANCIAL ASSET RISK CATEGORIES AS AT 31 DECEMBER 2018 No Short term rating Long term rating rating Total between between F1 F2 AA+ and A+ and (amounts in € 000’s) or higher or lower AAA AA A- BBB+

Cash and balances at central banks 1,096,838 ------1,096,838

Due from banks 133,790 885 - - - - - 134,675

Derivatives ------24,277 24,277

Financial assets at fair value through ------13,721 13,721 profit or loss

Investments at amortised cost - - 325,521 308,882 385,990 - 13,197 1,033,590

Loans and receivables ------1,409,649 1,409,649

1,230,628 885 325,521 308,882 385,990 - 1,460,844 3,712,750

Garantees ------106 106

Total 1,230,628 885 325,521 308,882 385,990 - 1,460,950 3,712,856

FINANCIAL ASSET RISK CATEGORIES AS AT 31 DECEMBER 2017 No Short term rating Long term rating rating Total between between F1 F2 AA+ and A+ and or higher or lower AAA AA A- BBB+

Cash and balances at central banks 1,003,537 ------1,003,537

Due from banks 131,361 2,607 - - - - - 133,968

Derivatives ------37,311 37,311

Financial assets at fair value through ------16,613 16,613 profit or loss

Available-for-sale financial assets - - - 333,790 449,656 13,848 - 797,294

Held-to-maturity financial assets - - 233,274 108,916 - - - 342,190

Loans and receivables ------1,303,297 1,303,297

1,134,898 2,607 233,274 442,706 449,656 13,848 1,357,221 3,634,210

Garantees ------774 774

Total 1,134,898 2,607 233,274 442,706 449,656 13,848 1,357,995 3,634,984

166 FINANCIAL STATEMENTS

PROVISION FOR EXPECTED CREDIT LOSS BinckBank holds provisions for expected credit loss on financial assets measured at amortised cost. The credit risk for financial assets measured at fair value is deemed to be included in the price. The provision for expected credit loss is based on an estimate of the loss arising from difference between the expected cash flows and the contractual cash flows. The methodology takes account of both historical and prospective information and contains subjective estimates made by management. The provisions model is based on a number of factors:

• The magnitude of the deterioration of the credit risk of the counterparty as compared to initial recognition; • The probability of default of the counterparty (PD); • The loss given default (LGD), taking account of collateral and forbearance measures; • The exposure at default (EAD) of the counterparty.

Significant deterioration of credit risk In the assessment of the creditrisk of counterparties to the various stages we make use of the term deterioration of credit risk. BinckBank uses the following key characteristics for identification of a significant deterioration of credit risk:

• The borrower is in arrears for more than 2 collection moments, which corresponds to more than 30 days (stage 2) or 90 days (stage 3); • Macroeconomic factors reflect a significant risk of deterioration of creditrisk; • The external ratings of the counterparties show a relative deterioration of credit risk exceeding the defined bandwidths.

Definition of default Within the determination of the credit loss, the definition of default is also of significant importance. The definition of default has been used in the determination of the credit risk and is therefore important for the assessment of the application of the expected 12 months credit loss or credit loss for the entire duration of the instrument. BinckBank uses the following key characteristics for identification of default:

• The borrower is in arrears for more than 90 days; • The borrower is not expected to be able to meet its obligations.

BinckBank applies both quantitative and qualitative indicators, ALCO analyses and publicly available external credit ratings when assessing the credit risk and whether the borrower is expected to be able to meet its obligations. In this respect BinckBank alignes as much as possible with the risk assessment as applied within the risk management framework.

BinckBank assesses for all financial assets valued at amortised cost or creditworthiness has dropped significantly. The determination of a significant deterioration in credit risk takes place by comparing the credit risk per reporting date in relation to the determined credit risk on initial recognition of the asset. In this assessment BinckBank includes objective, available and where possible forward-looking information. Financial assets whose credit risk has not significantly deteriorated are classified as stage 1. The provision for expected losses for these assets is based on the probability that the counterparty will be in default in a period of 1 year (year PD). For the financial assets for which BinckBank identifies the counterparty has a significant deterioration in credit risk are classified in stage 2 or stage 3. In these cases, the expected credit loss is determined on the basis of the probability of default over the entire term of the asset.

In addition to qualitative and quantitative indicators, BinckBank applies a limit of more than 30 days as an indicator for a transition from stage 1 to stage 2, and a limit of 90 days of delay for the transition from stage 2 to stage 3. These limits can only be waived if there is valid and demonstrable evidence is that the creditworthiness is different than on the basis of these limits.

BinckBank determines the expected credit loss on both an individual and collective basis. A collective approach can be elected as determined by the materiality and presence of identical nature and characteristics of the instruments. BinckBank adopts a collective approach to provisions for collateralised loans. BinckBank has adopted parameters for the calculation of the provision for the mortgage portfolio that are applicable to the entire portfolio.

The expected credit loss provision model makes use of prospective information such as macro-economic factors where this is deemed to relevant and the information is available. Prospective information other than external credit ratings is not used for financial assets with a term that is so short that macro-economic factors will not have a material influence, such as cash and banks. Prospective information may also be omitted from the model when objective prospective information is not available or is only available at disproportionately high costs or excessive effort.

167 FINANCIAL STATEMENTS

BinckBank sources externally available credit loss data data when it does not have any historical information about movements in credit loss, such as for recently developed mortgage portfolios. Periodic assessments are then carried out to determine whether the characteristics of the adopted portfolios are in sufficient agreement with the characteristics of BinckBank’s portfolios.

The methodology and the assumptions used in estimating future cash flows are regularly evaluated to reduce variances between estimated and actual losses.

BinckBank has recognised the following expected credit loss on financial assets measured at amortised cost as at 31 December. The table’s comparative figure at 31 December 2017 is determined on the basis of an incurred loss model under IAS 39 and is recognised in the opening statement of financial position after the transition to IFRS 9.

The movement in the provision for expected credit loss on the investments at amortised cost is as follows:

(amounts in € 000’s) 31 December 2018 1 January 2018 31 December 2017

Cash and balances at central banks 170 200 -

Due to banks 114 100 -

Investments at amortised cost 227 277 -

Available-for-sale financial assets - - -

Held-to-maturity financial assets - - -

Loans and receivables 2,215 2,014 671

Financial guarantees - - -

Provision for expected credit loss 2,726 2,591 671

Cash and balances with central banks and Due from Banks Cash and balances with central banks and Due from Banks are individually assessed for expected credit loss. Cash and balances with central banks and Due from Banks consists entirely of items available on demand, as a result of which the expected credit loss is determined on the basis of a period of less than one year. The provision for expected credit loss recognised for these assets is set at the 12-month expected loss. No other variables or factors are taken into account in determining the provision for expected credit loss on this portfolio.

Cash and balances with central banks and Due from Banks are all classified in stage 1. The provision for expected credit loss recognised at 31 December 2018 amounts to € 170 thousand for cash and € 114 thousand for banks.

Investments at amortised cost Financial assets at amortised cost are individually assessed for expected credit loss. As BinckBank’s investment portfolio consists solely of investments with an investment grade rating, the exception for low credit risks allowed under IFRS 9 is applied. BinckBank has assumed that the credit risk has not deteriorated since initial recognition and these assets are classified in stage 1.

The provision for expected credit loss recognised for these assets is set at the 12-month expected loss. No other variables or factors are taken into account in determining the provision for expected credit loss on this portfolio.

168 FINANCIAL STATEMENTS

The movement in the provision for expected credit loss on the investments at amortised cost is as follows: 2018 Stage 1 Stage 2 Stage 3 12-month lifetime lifetime expected expected expected (amounts in € 000’s) credit loss credit loss credit loss Total

Provision as at 31 December - - - -

IFRS 9 transition adjustment 277 - - 277

Provision as at 1 January 277 - - 277

Decreases due to derecognition (46) - - (46)

Increases due to origination and acquisition 37 - - 37

Changes due to change in credit risk (net) (46) - - (46)

Changes due to write-offs - - - -

Changes due to modifications without 5 - - 5 derecognition (net)

Other changes - - - -

Provision as at 31 December 227 - - 227

The movement in the carrying value to various stages of credit risk for the investments at amortised cost is as follows: 2018 Stage 1 Stage 2 Stage 3 12-month lifetime lifetime expected expected expected (amounts in € 000’s) credit loss credit loss credit loss Total

Gross balance as at 31 December - - - -

IFRS 9 transition adjustment 1,138,828 - - 1,138,828

Gross balance as at 1 January 1,138,828 - - 1,138,828

Decreases due to derecognition (460,692) - - (460,692)

Increases due to origination and acquisition 361,929 - - 361,929

Foreign exchange movments 10,320 - - 10,320

Movements due to amortisation (13,600) - - (13,600)

Movement accrued interest (2,968) - - (2,968)

Transfers between stages - - - -

Gross balance as at 31 December 1,033,817 - - 1,033,817

Provision for expected credit loss (227) - - (227)

Balance as at 31 December 1,033,590 - - 1,033,590

169 FINANCIAL STATEMENTS

Loans and receivables BinckBank’s loans and receivables consists of loans collateralised with securities and receivables from mortgage rights.

Loans collateralised with securities are individually assessed for expected credit loss. Collateralised loans are automatically assessed at the time that they are advanced, taking account of the funding percentages for the collateral that qualifies for that purpose. The loans granted are then monitored on the basis of real-time prices. The credit risk lies in movements in value of the collateral received. Specific attention is then given to undesirable concentrations in client portfolios, referred to as ‘concentration risks’. A cover deficit arises when the value of the collateral is insufficient to cover the collateralised loans and/or margin obligations. The client must make up a cover deficit within one to five trading days. When the client fails to comply with this requirement then BinckBank is entitled to wind down the position. The provision for expected credit loss on credit collateralised with securities is then determined both individually (stage 3) and collectively on the basis of the historical loss on the entire portfolio. No other factors are taken into account in the determination of the provision for expected credit loss on this portfolio.

BinckBank assesses the individual receivables in the mortgage portfolio for expected credit loss. Changes in credit risk are monitored on the basis of payment arrears periods, forbearance measures and other additional agreements. BinckBank adopts a fixed criterion whereby arrears in interest and/or redemptions of more than 30 days are regarded as a significant deterioration of credit risk, after which these loans are included in stage 2. Non-Performing Loans are classified in stage 3.

These are loans that can be designated as:

• loans that have been in material arrears for over 90 days; or • loans with a Probability of Default of 1; or • forbearance exposures for which the two-year probationary period that has yet to begin.

As BinckBank has limited historical information available for the mortgage receivables, the parameters of the model for these instruments are determined on the basis of the available public information representative for the portfolios held by BinckBank. BinckBank has also included macro-economic variables such as the unemployment rate in the probability of default.

BinckBank provides loans solely on the basis of collateral received in the form of marketable securities, bank guarantees or mortgage collateral. The loans and receivables classified by cover ratio are as follows:

(amounts in € 000’s) 31 December 2018 31 December 2017

NHG guaranteed 296,332 318,471

Less than 75% of the value of the collateral 820,791 539,796

Between 75% and 90% of the value of the collateral 121,634 273,529

Between 90% and 100% of the value of the collateral 146,876 107,222

Greater than 100% of the value of the collateral 17,535 59,763

Accrued interest (not allocated) 6,441 5,467

Total 1,409,609 1,304,248

The determination of the expected future cash flows from a financial asset for which collateral has been received takes account of the cash flows that will arise on realisation of the collateral less the costs that will be incurred in obtaining and selling the collateral.

In 2018, an amount of € 71 thousand was written off on loans and receivables because there was no possibility of receiving the remaining cash flows.

170 FINANCIAL STATEMENTS

The movement in the provision for expected credit loss on loans and receivables is as follows: 2018 Stage 1 Stage 2 Stage 3 12-month lifetime lifetime expected expected expected (amounts in € 000’s) credit loss credit loss credit loss Total

Provision as at 31 December 165 - 506 671

IFRS 9 transition adjustment 1,124 163 57 1,344

Provision as at 1 January 1,289 163 563 2,015

Decreases due to redemptions and derecognition (90) (2) (2) (94)

Increases due to origination and acquisition 296 - - 296

Changes due to change in credit risk (net) 41 (150) 36 (73)

Changes due to write-offs - - - -

Changes due to modifications without (87) - 158 71 derecognition (net)

Other changes - - - -

Provision as at 31 December 1,449 11 756 2,215

The movement in the carrying value to various stages of creditworthiness for the loans and receivables is as follows: 2018 Stage 1 Stage 2 Stage 3 12-month lifetime lifetime expected expected expected (amounts in € 000’s) credit loss credit loss credit loss Total

Gross balance as at 31 December 1,302,200 975 1,073 1,304,248

Decreases due to redemptions and derecognition (60,531) (50) (285) (60,866)

Increases due to origination and acquisition 158,059 - 216 158,275

Changes due to modifications without 7,957 - - 7,957 derecognition (net)

Transfers between stages 454 (702) 248 -

Other movements - - (5) (5)

Gross balance as at 31 December 1,408,139 223 1,247 1,409,609

Provision for expected credit loss (1,449) (11) (756) (2,215)

Net balance as at 31 December 1,409,609 212 491 1,407,394

Fair value adjustment hedge accounting 2,255

Balance as at 31 December 1,409,649

171 FINANCIAL STATEMENTS

A significant deterioration in the credit risk for the loans and receivables mainly depends on the days past due. The table below shows the breakdown and the provision for expected credit loss for the respective periods:

2018 2017 Exposure Exposure (amounts in € 000’s) value Provision value Provision

Days past due

0-30 days 1,408,139 (1,449) 1,296,453 (164)

31-90 days 223 (11) 975 -

> 90 days 1,247 (756) 1,073 (507)

Total 1,409,609 (2,215) 1,298,501 (671)

FINANCIAL GUARANTEES, COMMITMENTS AND CONTINGENT LIABILITIES BinckBank has issued a limited number of guarantees on behalf of clients. These guarantees fall within the scope of the management of credit risk and are secured by securities collateral. The irrevocable facilities relate to outstanding mortgage offers for which BinckBank has a financing commitment to the service provider. BinckBank has, in view of the nature of the products, the contractual terms and the security, assessed the expected credit loss on these off-balance sheet items as very limited and, consequently, has not recognised any provision for expected credit loss.

ENCUMBERED AND UNENCUMBERED ASSETS Financial assets pledged as collateral Receipts and payments in relation to the settlement of securities transactions with the various parties involved do not occur at exactly the same time on the settlement date. BinckBank has bridged these intra-day time differences, by pledging part of its investment portfolio of fixed-income securities as collateral with its custodian. As there were no overnight exposures during and at the end of 2018 (and 2017), no pledge has been created.

BinckBank has guaranteed payments for the purposes of mortgages financing by pledging part of its investment portfolio of fixed-income securities as collateral with its counterparties.

Financial assets received as collateral BinckBank provides loans and other facilities on the basis of securities pledged by customers as collateral. BinckBank is not entitled to lend securities received as collateral and may only sell them if the borrower remains in default. BinckBank has established that all the risks and rewards of these securities remain for the account of the customer and for this reason has not recognised these securities in the statement of financial position.

Transferred financial assets As part of its liquidity management, BinckBank has repo facilities with several banks. Securities sold under the repo facilities are transferred to a third party, for which BinckBank receives cash. These transactions are carried out subject to conditions based on the ISDA rules with regard to collateral. BinckBank has established that it retains virtually all the risks and rewards of these securities – credit risk and market risk in particular – and therefore continues to recognise them in the statement of financial position. Furthermore, it assumes a financial liability with regard to the cash to be repaid. BinckBank did not use these facilities in either 2018 or 2017, and for this reason no such positions are recognised in the statement of financial position.

172 FINANCIAL STATEMENTS

The following table lists the value of the financial assets pledged as collateral and/or encumbered.

FINANCIAL ASSETS PLEDGED AND/OR ENCUMBERED (a) (b) (c)=(a)-(b) Financial Encumbered Un-encumbered (amounts in € 000’s) assets, gross financial assets financial assets

31 December 2018

ASSETS

Cash and balances at central banks 1,096,838 - 1,096,838

Due to banks 134,675 37,102 97,573

Derivatives 24,277 - 24,277

Financial assets at fair value through profit or loss 13,721 13,721 -

Investments at amortised cost 1,033,590 259,646 773,944

Loans and receivables 1,409,649 - 1,409,649

Total 3,712,750 310,469 3,402,281

31 December 2017

ASSETS

Cash and balances at central banks 1,003,537 - 1,003,537

Due to banks 133,968 32,693 101,275

Derivatives 37,311 - 37,311

Financial assets at fair value through profit or loss 16,613 16,613 -

Available-for-sale financial assets 797,294 182,763 614,531

Held-to-maturity financial assets 342,190 83,017 259,173

Loans and receivables 1,303,297 - 1,303,297

Total 3,634,210 315,086 3,319,124

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES Financial assets and liabilities are set off against each other and the net amount is presented in the statement of financial position when there is a legally enforceable right to set off the amounts and an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Generally, this does not apply to master netting agreements, and the assets and liabilities concerned are therefore presented gross in the statement of financial position. Master netting agreements usually stipulate separate net settlement of all financial instruments falling under the agreements in the event of default on a particular contract. While master netting agreements can substantially reduce credit risk, it should be noted that the extent to which the total credit risk is reduced can vary significantly within a short period, as the receivable is affected by every transaction under the agreement.

173 FINANCIAL STATEMENTS

The following tables present the financial assets and liabilities that are subject to offsetting in the statement of financial position under IAS 32 and the effects of master netting agreements that do not comply with IAS 32:

(a) (b) (c)=(a)-(b) (d) (e)=(c)-(d)

Recognised Related amounts not offset in financial the balance sheet assets and Financial assets Financial liabilities and liabilities Collateral assets offset in included in received and liabilities, the balance the balance Financial and paid Net (amounts in € 000’s) gross sheet, gross sheet, net instruments in cash amount

31 December 2018

ASSETS

Due from banks 134,675 - 134,675 (4,474) - 130,201

Derivatives 24,277 - 24,277 - - 24,277

Other assets 138,526 - 138,526 - (2,071) 136,455

Total 297,478 - 297,478 (4,474) (2,071) 290,933

LIABILITIES

Due to banks 5,274 - 5,274 (4,474) - 800

Derivatives 26,759 - 26,759 - (2,071) 24,688

Other liabilities 28,040 - 28,040 - - 28,040

Total 60,073 - 60,073 (4,474) (2,071) 53,528

31 December 2017

ASSETS

Due from banks 133,968 - 133,968 (1,566) - 132,402

Derivatives 37,311 - 37,311 - (381) 36,930

Other assets 58,754 - 58,754 - - 58,754

Total 230,033 - 230,033 (1,566) (381) 228,086

LIABILITIES

Due to banks 2,538 - 2,538 (1,566) - 972

Derivatives 37,055 - 37,055 - (107) 36,948

Other liabilities 52,084 - 52,084 - (274) 51,810

Total 91,677 - 91,677 (1,566) (381) 89,730

174 FINANCIAL STATEMENTS

CAPITAL REQUIREMENTS PILLAR 1 FOR CREDIT RISK BinckBank applies the standardised method as described in the CRR to calculate the risk weighted assets for credit risk purposes. The following table shows how the risk-weighted items are determined.

Exposure net of value adjustments Risk weighted 8% Pillar capital and provisions exposure amount requirement

(amounts in € 000’s) 2018 2017 2018 2017 2018 2017

Credit risk standardised method

Central governments or central banks 1,366,434 1,202,189 - 108 - 9

Regional governments or local authorities 20,267 131,917 - - - -

Public sector entities ------

Multilateral Development Banks 22,265 12,528 - - - -

International organisations ------

Institutions 656,351 800,978 235,744 278,677 18,860 22,294

Corporates 337,839 305,810 90 29 7 2

Retail 352,595 372,724 49,476 52,440 3,958 4,195

Secured by mortgages on immovable property 741,055 660,268 167,568 134,097 13,405 10,728

Exposures in default 585 660 298 187 24 15

Covered bonds 143,805 83,196 14,380 8,320 1,150 666

Claims on institutions and corporates with a short- 132,740 113,075 47,147 47,159 3,772 3,773 term credit assessment

Equity 125 1,720 313 4,301 25 344

Other items 62,409 60,284 56,909 56,357 4,553 4,509

Total 3,836,470 3,745,349 571,925 581,675 45,754 46,535

175 FINANCIAL STATEMENTS

MAXIMUM CREDIT RISK The maximum credit risk of items in the statement of financial position is, in general, the carrying value of the relevant financial asset. The maximum credit risk of off-balance sheet items is the maximum amount that could possibly be paid. Collateral received is not taken into account in determining the maximum credit risk. The maximum credit risk of the following items differs from the carrying value. Neither past due Non- nor Performing (amounts in € 000’s) Total Limit impaired Past due Impaired Provision Loans

31 December 2018

Loans and receivables

Collaterlised by securities 592,526 592,632 592,531 - - (5) -

Collaterlised by bank guarantees 5,292 14,670 5,292 - - - -

Collaterlised by residential property 803,123 813,918 803,874 688 2,246 (1,498) 2,246

Other receivables 12 724 - - 724 (712) 724

Total 1,400,953 1,421,943 1,401,697 688 2,970 (2,215) 2,970

31 December 2017

Loans and receivables

Collaterlised by securities 558,796 559,570 558,796 - - - -

Collaterlised by bank guarantees 2,739 10,524 2,739 - - - -

Collaterlised by residential property 736,573 755,211 735,198 975 565 (165) 565

Other receivables 2 508 - - 508 (506) 508

Total 1,298,110 1,325,813 1,296,733 975 1,073 (671) 1,073

The total outstanding amount in the tables is presented less the provision for expected credit loss.

SECURITIES LENDING BinckBank usually acts as the principal in the borrowing and lending of securities.

The following table lists the receivables and payables relating to securities recognised and loans provided, inclusive of the collateral received.

(amounts in € 000’s) 2018 2017

Receivables in respect of securities lending 32,581 14,026

Collateral received 36,749 12,784

Liabilities in respect of securities lending 29,762 12,895

Collateral Paid 33,550 11,632

Received and paid collateral contains mainly non-cash positions.

176 FINANCIAL STATEMENTS

41.6 MARKET RISK BinckBank’s sole market risk in Pillar 1 is currency risk. Currency risk is the risk of fluctuations in the value of items denominated in foreign currency due to movements in exchange rates. The policy is not to take active foreign-exchange trading positions.

The currency risk associated with the assets and liabilities is presented in the following table.

CURRENCY EXPOSURE AS AT 31 DECEMBER 2018

(amounts in € 000’s) Assets Liabilities Balance

EUR 3,651,093 3,651,322 (229)

GBP 6,251 6,093 158

USD 394,764 394,950 (186)

Other currencies 18,885 18,628 257

Total 4,070,993 4,070,993 -

CURRENCY EXPOSURE AS AT 31 DECEMBER 2017

(amounts in € 000’s) Assets Liabilities Balance

EUR 3,576,373 3,577,373 (1,000)

GBP 5,006 5,250 (244)

USD 326,361 324,242 2,119

Other currencies 16,078 16,953 (875)

Total 3,923,818 3,923,818 -

41.7 INTEREST RATE RISK Interest rate risk relates to the sensitivity of the interest rate result and/or the market value of the bank to interest rate movements. Movements in the yield curve result in changes in interest cash flows and/or the cash value thereof. Interest rate movements can affect both the interest rate result and the bank’s market value. A distinction can be made between the following forms of interest rate risk:

• Repricing risk: the interest rate risk arising from timing differences in interest rate adjustments of instruments. The earlier or later repricing of assets than liabilities creates interest rate risk. The repricing risk depends on factors including the extent to which interest rate movements are spread evenly across the yield curve (parallel yield curve shift); • Yield curve risk: the interest rate risk arising from non-parallel shifts in the yield curve; • Optionality risk: the interest rate risk arising when specific options have been made available to clients (for example, partially penalty-free right of early redemption or a capped variable interest rate) and this risk is not or cannot be fully hedged; • Basis risk: the interest rate risk that arises when movements in an instrument used as a hedge do not precisely mirror movements in the corresponding item in the statement of financial position (for example, a mortgage based on one-month Euribor versus a swap based on three-month Euribor).

Interest rate risk management involves the use of models to determine the interest rate risk of the assets and liabilities, whereby account is taken of the contractual and client behavioural aspects of the products.

177 FINANCIAL STATEMENTS

BinckBank pursues a prudent interest rate risk policy, which considers both the short-term and the long-term interest rate risk. The short-term interest rate risk is primarily addressed from the perspective of income (earnings-at-risk). This encompasses an analysis of the sensitivity of interest income in a series of interest rate scenarios. The earnings scenarios were recalibrated in 2018, when account was taken of the current low interest rates and other factors. The horizon of the earnings at risk scenarios was also extended to two years. The earnings-at-risk analyses reveal that the following are the most adverse scenarios:

• Increased competition for customer savings, resulting in higher interest rates paid on customer deposits. • Further decline of market interest rates, in which BinckBank is unable reduce the deposit interest rate to less than zero per cent. This scenario assumes that customers regard zero per cent as a ‘natural’ minimum interest rate. Customers receiving less than zero per cent could be inclined to transfer their deposits to competing banks or even withdraw them in cash.

In 2018, the results of the scenarios for earnings-at-risk remained within the defined limits.

The long-term interest rate risk is controlled by adopting the economic value approach, which assesses how changes in interest rates could impact the value of the bank’s assets and liabilities. Duration analysis is the most important instrument in economic value calculations. The bank’s duration of equity is an indication of the net effect of parallel interest rate movements on the economic value.

During 2018, the duration of equity was managed by ALCO within a bandwidth of 0.7 to 3.3 years. Customer interest in long term fixed interest rate loans, in particular mortgages, remained high due to the low interest rate climate. The resulting upward effect on the duration was mitigated by entering into interest rate swaps. The implementation of a new ALM model for the management of interest rate risk in the banking book (IRRBB) resulted in significant improvements in the management of exposure to IRRBB on a forward-looking basis.

With the duration of 1.1 years at the end of 2018, the value of equity would decrease by 3.7% (€ 17.8 million) if interest rates were to increase in parallel by 100 basis points. With a parallel decline in interest rates of 100 basis points the value of equity would increase by the same amount.

178 FINANCIAL STATEMENTS

The following tables present the interest rate sensitivity on the basis of the contractual interest rate maturities of the individual balance sheet items.

INTEREST RATE MATURITY CALENDAR AS AT 31 DECEMBER 2018 Non- > 1 month > 1 year > 5 year interest (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year bearing Total

ASSETS

Cash and balances at central banks 1,096,838 - - - - - 1,096,838

Due from banks 134,675 - - - - - 134,675

Derivatives - - - - - 24,277 24,277

Financial assets at fair value through - - - - - 13,721 13,721 profit or loss

Investments at amortised cost 16,968 224,701 791,921 - - - 1,033,590

Loans and receivables 611,082 49,295 207,055 516,404 25,813 - 1,409,649

Total 1,859,563 273,996 998,976 516,404 25,813 37,998 3,712,750

LIABILITIES

Due to banks 5,274 - - - - - 5,274

Derivatives 43 316 94 1,618 - 24,688 26,759

Financial liabilities at fair value through - - - - - 161 161 profit or loss

Funds entrusted 3,562,200 - - - - - 3,562,200

Total 3,567,517 316 94 1,618 - 24,849 3,594,394

179 FINANCIAL STATEMENTS

INTEREST RATE MATURITY CALENDAR AS AT 31 DECEMBER 2017 Non- > 1 month > 1 year > 5 year interest (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year bearing Total

ASSETS

Cash and balances at central banks 1,003,537 - - - - - 1,003,537

Due from banks 133,968 - - - - - 133,968

Derivatives - - - - - 37,311 37,311

Financial assets at fair value through profit - - - - - 16,613 16,613 or loss

Available-for-sale financial assets 23,391 237,313 536,590 - - - 797,294

Held-to-maturity financial assets 22,839 182,452 136,899 - - - 342,190

Loans and receivables 567,122 26,321 89,721 571,387 48,746 - 1,303,297

Total 1,750,857 446,086 763,210 571,387 48,746 53,924 3,634,210

LIABILITIES

Due to banks 2,538 - - - - - 2,538

Derivatives - - - - - 37,055 37,055

Financial liabilities at fair value through - - - - - 231 231 profit or loss

Funds entrusted 3,383,507 - - - - - 3,383,507

Total 3,386,045 - - - - 37,286 3,423,331

180 FINANCIAL STATEMENTS

INTEREST RATE RISK ON THE RESULT The short-term interest risk is addressed from an income perspective. The effect of a gradual movement in interest rates on BinckBank’s profitability is determined using an Earnings-at-Risk model. This measures the impact of the interest-rate risk on the adjusted net result determined by calculating the expected interest income and interest expense on the basis of a gradual change in the market interest rate over a period of one year. This clearly expresses effect of the interest rate sensitivity on BinckBank’s result.

GRADUAL PARALLEL YIELD CURVE SHIFT Effect on the result

(amounts in € 000’s) 31 December 2018 31 December 2017

Over a period of 1 year

+200 basis points 12,396 9,913

-200 basis points (688) (774)

Over a period of 2 years

+200 basis points 37,630 33,075

-200 basis points (4,044) (5,298)

INTEREST RATE RISK ON CAPITAL An economic value approach is adopted to the long-term interest rate risk. This approach examines movements in the value of the assets and liabilities caused by sudden shifts in the yield curve, or interest rate shocks. The economic value approach uses, in particular, duration analyses. The duration of equity is an indication of movements in the economic value of equity due to interest rate fluctuations.

The investments in mortgages with longer fixed interest periods has an upward effect on the duration of equity. As the duration of the assets is higher than that of the liabilities, a decline in the interest rate has a negative effect on BinckBank’s equity. BinckBank controls the sensitivity of its equity to interest-rate movements with tolerance levels and monthly interest-rate risk reports to the ALCO. The effect of an interest-rate shock of 200 basis points on equity is presented in the following table (before tax).

SUDDEN PARALLEL YIELD CURVE SHIFT Effect on equity

31 December 2018 31 December 2017

+200 basis points (18,457) (21,163)

-200 basis points (2,454) (3,424)

181 FINANCIAL STATEMENTS

41.8 LIQUIDITY RISK Liquidity risk is the risk that BinckBank will not be able to meet its payment obligations. BinckBank adopts a prudent policy on liquidity risk that is designed to ensure that demand by its customers for their cash can be met at all times. There were no materially significant liquidity incidents in the reporting year 2018.

The most important objective of our liquidity risk management is to ensure that the bank is capable of retaining or generating sufficient cash liquidity to meet its payment obligations in full as soon as they become payable and at acceptable conditions. As liquidity risk can theoretically threaten the continuity of a bank BinckBank maintains a low liquidity risk tolerance. One of the most important elements of our approach to liquidity risk management is ensuring that stakeholders are always confident of the solidity of the bank. The policy for the measurement, monitoring, and control of liquidity risks in BinckBank is laid down in the Internal Liquidity Adequacy Assessment Process (ILAAP), which is updated and evaluated by the supervisory authority each year.

BinckBank controls liquidity risks with a risk framework that provides for the extensive measurement, evaluation and calibration of indicators related to liquidity risk. The framework consists of the risk appetite, liquidity buffers, monitoring and reporting, forecasts, capital and funding plans and planning for unforeseen financing. Clear escalation procedures are in place in the event of a threat of the liquidity falling below the lower limit of the internal liquidity target. Escalation is based on what is referred to as a ‘traffic-lights’ model. This is a system of warning signals that leads to an increased level of vigilance with respect to the liquidity position. Code green applies when none of the escalation criteria have been triggered. This can be escalated to code yellow, orange, and ultimately code red. Code red would apply in a situation of negative publicity on BinckBank’s reputation and/or heavy cash outflow in combination with a limited cash balance.

The ILAAP includes an annual revision of the liquidity risk target and limits. The limits include, but are not restricted to, levels for the liquidity coverage ratio (LCR), net stable funding ratio (NSFR), liquidity buffers and the stress test results, all of which are reported to the ALCO monthly. As the liquidity buffer is the most important form of defence against liquidity risk, the quality and volume of the buffer is monitored daily, together with inflows and outflows of funds entrusted.

LIQUIDITY STRESS TESTS Scenario analysis is part of our liquidity and funding plans. Stress tests are a key element of these analyses. We carry out stress tests to assess the bank’s resilience to various adverse liquidity events, ranging from BinckBank’s events and systemic events to combinations of the two. The liquidity stress tests are based on various alternative sources of liquidity (Contingency Funding). These sources are:

• Repurchase agreements; • Multi-currency credit facility (with securities collateral); • Liquidation of the investment portfolio; • Disposal of the mortgage portfolio; • European Central Bank reserve requirement.

The stress tests carried out in the past years reveal that BinckBank has sufficient liquid assets, contingent assets and other financing options to comply with the internal and external liquidity requirements. The bank’s policy is focused on investing funds entrusted in a manner that avoids undesirable risk concentrations and ensures that sufficient liquid assets are available to guarantee liquidity in the event that a stress scenario occcurs.

182 FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS – REMAINING CONTRACTUAL MATURITY The liabilities on the basis of the remaining contractual maturity of financial liabilities are as follows:

UNDISCOUNTED LIABILITIES CLASSIFIED BY REMAINING CONTRACTUAL MATURITY AS AT 31 DECEMBER 2018

> 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total

LIABILITIES

Due to banks 5,274 - - - - 5,274

Derivatives - 781 - 1,712 24,266 26,759

Financial liabilities at fair value through profit or loss - 161 - - - 161

Funds entrusted 3,562,200 - - - - 3,562,200

Total 3,567,474 942 - 1,712 24,266 3,594,394

UNDISCOUNTED LIABILITIES CLASSIFIED BY REMAINING CONTRACTUAL MATURITY AS AT 31 DECEMBER 2017

> 1 month > 1 year > 5 year < 1 month < 1 year < 5 year < 10 year > 10 year Total

LIABILITIES

Due to banks 2,538 - - - - 2,538

Derivatives - 99 - 28 36,928 37,055

Financial liabilities at fair value through profit or loss - 231 - - - 231

Funds entrusted 3,383,507 - - - - 3,383,507

Total 3,386,045 330 - 28 36,928 3,423,331

183 FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS BY EXPECTED MATURITY Funds entrusted are designated as demand deposits. In practice, a longer behaviour-typical maturity is allocated to these products. The positions at the end of the year are representative of the positions during the year. In addition, the loan facilities and possibilities for liquidation of the interest-bearing securities are shown. These are fixed-interest securities which can be traded in an active market or used as collateral for lending from DNB.

MATURITY CALENDAR AS AT 31 DECEMBER 2018 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total

ASSETS

Cash and balances at central banks 1,096,838 - - - - 1,096,838

Due from banks 134,675 - - - - 134,675

Derivatives - 48 65 (65) 24,229 24,277

Financial assets at fair value through profit or loss - 13,721 - - - 13,721

Investments at amortised cost 16,216 231,587 785,786 - - 1,033,589

Loans and receivables 611,654 46,341 207,123 516,382 28,148 1,409,648

1,859,383 291,697 992,974 516,317 52,377 3,712,748

Guarantees - - - 103 3 106

Total 1,859,383 291,697 992,974 516,420 52,380 3,712,854

LIABILITIES

Due to banks 5,274 - - - - 5,274

Derivatives - 781 - 1,712 24,266 26,759

Financial liabilities at fair value through profit or loss - 161 - - - 161

Funds entrusted 3,562,200 - - - - 3,562,200

Total 3,567,474 942 - 1,712 24,266 3,594,394

Liquidity surplus/deficit on basis of (1,708,091) 290,755 992,974 514,708 28,114 118,460 contractual maturities

Credit and lending facilities and possibilities 1,017,373 (231,587) (785,786) - - - for liquidation Liquidity surplus/deficit taking account of credit and lending facilities and (690,718) 59,168 207,188 514,708 28,114 118,460 possibilities for liquidation

184 FINANCIAL STATEMENTS

MATURITY CALENDAR AS AT 31 DECEMBER 2017 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total

ASSETS

Cash and balances at central banks 1,003,537 - - - - 1,003,537

Due from banks 133,968 - - - - 133,968

Derivatives - 18 65 316 36,912 37,311

Financial assets at fair value through profit or loss - 16,613 - - - 16,613

Available-for-sale financial assets 25,736 241,458 530,100 - - 797,294

Held-to-maturity financial assets 22,998 182,806 136,386 - - 342,190

Loans and receivables 567,122 16,114 65,274 79,179 575,608 1,303,297

1,753,361 457,009 731,825 79,495 612,520 3,634,210

Guarantees - 37 - 737 - 774

Total 1,753,361 457,046 731,825 80,232 612,520 3,634,984

LIABILITIES

Due to banks 2,538 - - - - 2,538

Derivatives - 99 - 28 36,928 37,055

Financial liabilities at fair value through profit or loss - 231 - - - 231

Funds entrusted 3,383,507 - - - - 3,383,507

Total 3,386,045 330 - 28 36,928 3,423,331

Liquidity surplus/deficit on basis of (1,632,684) 456,716 731,825 80,204 575,592 211,653 contractual maturities

Credit and lending facilities and possibilities 1,090,750 (424,264) (666,486) - - - for liquidation Liquidity surplus/deficit taking account of credit and lending facilities and (541,934) 32,452 65,339 80,204 575,592 211,653 possibilities for liquidation

185 FINANCIAL STATEMENTS

41.9 OPERATIONAL RISK Operational risk is the risk of loss caused by inadequate or deficient internal processes and systems, human error or external events and fraud. Due to the nature of its business activities, BinckBank has a high inherent operational risk. Operational risk is determined by factors including the large number of complex administrative entries that must be processed on a daily basis. Another important aspect of the operational risk is that communication with the customer and third parties (stock exchanges) is primarily via the internet or telephone. This means that daily practice depend heavily on ICT and external connections. As a result, BinckBank is inherently sensitive to ICT disruptions. A third aspect that leads to a high inherent operation risk is BinckBank’s commitment to innovation and the improvement of its services, which results in the regular implementation of system adjustments and improvements.

A framework of processes, systems, and accompanying control measures has been established to consistently control operational risks. This, together with a clear organisational structure within the 3LoD model, forms the basis for the design of internal control system. BinckBank’s first-line departments carry out a number of risk management processes. Risk management in the second line of defence has a coordinating, advisory, and controlling role to safeguard the correct performance of the first-line risk management processes. Although a large number of risk-mitigating measures are included in the risk management framework, it is nevertheless conceivable that BinckBank is confronted with an operational loss. BinckBank is insured with third parties for certain types of operational loss. This insurance includes policies for directors’ and officers’ liability, corporate liability, professional liability, inventory, reinstatement costs, and trading loss.

In 2018, the internal target was that these operational losses on regular operations would not exceed 1.0% of total income from operations. In 2018, operational losses amounted to 2.09% (1.12% in 2017) of the total income from operations. These operational losses consist primarily of the financial result of out-trades, compensation for customers (claims) and losses resulting from faults in the ICT systems and operational processes Movements in current claims and provisions for operational losses are included.

SPECIFIC OPERATIONAL RISKS ICT risk As the business activities of BinckBank depend heavily on ICT, a significant proportion of the operational risk concerns ICT risk. Deficiencies in ICT can constitute a significant threat to critical business processes and customer services. Specific control measures have been implemented to reduce this risk. These include measures in the areas of IT administration, software development, and cybersecurity.

Information security Information security is regarded as a company-wide responsibility for the protection of customer and commercial information. The second line is responsible for formulating the strategic information security policy and the risk management framework, and monitors the correct adherence to this policy. The first line of defence is responsible for the security of BinckBank’s systems, applications and data. Implementing the appropriate measures based on targeted risk assessments for business and IT processes guarantees that the data of our customers and our company data are protected in the appropriate manner.

Business Continuity Management (BCM) The availability of critical services and the security of customers, visitors, and employees are of the highest importance to BinckBank. BinckBank has implemented a BCM process to ensure the availability of its critical services. BCM forms part of the overall risk management framework. The Business Community Council meets at least once per quarter. The Council also acts as the crisis team in the event of an emergency and operates on the basis of a clearly defined and tested crisis management process. BinckBank also has a financial recovery plan, which specifies the measures that BinckBank can implement to recover from a financial or other crisis in autonomy. BinckBank uses the standardised approach (SA) to calculate its operational risk under Pillar 1. The SA divides the operating income in the three preceding financial years into various business lines with prescribed capital requirements of between 12% and 18%. The following table provides an insight into the calculation of the capital requirement arising from the operational risk.

186 FINANCIAL STATEMENTS

STANDARDISED APPROACH AS AT 31 DECEMBER 2018 Operating income Risk Capital (amounts in € 000’s) 2016 2017 2018 Average weighting requirement

BUSINESS LINE

Retail brokerage 89,996 93,949 99,254 94,400 12% 11,328

Retail banking 26,133 29,975 32,093 29,400 12% 3,528

Agency services 7,951 4,584 1,397 4,644 15% 697

Asset management 12,987 11,720 8,375 11,027 12% 1,323

Total 137,067 140,228 141,119 139,471 16,876

STANDARDISED APPROACH AS AT 31 DECEMBER 2017 Operating income Risk Capital 2015 2016 2017 Average weighting requirement

BUSINESS LINE

Retail brokerage 107,254 89,996 93,949 97,066 12% 11,648

Retail banking 25,702 26,133 29,975 27,270 12% 3,273

Agency services 7,928 7,951 4,584 6,821 15% 1,023

Asset management 19,204 12,987 11,720 14,637 12% 1,756

Total 160,088 137,067 140,228 145,794 17,700

41.10 BUSINESS RISK Business risk can be defined as the threat to BinckBank’s results or equity arising from an adequate response to changes in environmental factors or incorrect strategic decisions.

Environmental factors are competitor activities, customers, potential entrants to the market and government institutions. BinckBank’s business risk is mainly reflected in its dependence on the transaction volume in the financial markets. This makes BinckBank’s profitability heavily reliant on the sentiment and volatility of the stock exchange. In 2017 and 2018, various projects were initiated with the objective of creating a more stable flow of revenue to reduce the business risk. Services such as ‘Laten Beleggen’, ‘Binck Forward’, and investments in the Dutch residential mortgage market with a recurrent earnings model will result in a more stable revenue stream.

41.11 FINANCIAL REPORTING RISK The financial reporting risk is the risk of BinckBank failing to comply with the legislation and regulations governing financial reports and the disclosure of information to the market, governments, and supervisory authorities. BinckBank endorses the importance of providing accurate, timely, and comprehensive reports to the market, governments, and regulators. The demand for information, data points, and detailed reports has increased at all external reporting levels – reports to the supervisory authority, financial statements and tax reports – in recent years and a further increase is expected in the coming years. BinckBank draws on the expertise of internal specialists in all areas of the reporting activities. In addition, external advisers are brought in where needed to support internal specialists in certain areas. BinckBank has established stringent standards on the timeliness and accuracy of the reports to meet the external requirements. Compliance with these standards is monitored monthly. Monitoring the adequacy of the external financial reports is the responsibility of the accounting committee and the audit committee.

187 FINANCIAL STATEMENTS

41.12 LEGAL AND COMPLIANCE RISK The legal and compliance risk is the risk of BinckBank failing to comply with the applicable legislation and regulations, which may result in loss. BinckBank attaches paramount importance to values including integrity and reliability, as is manifested by its code of conduct, house rules, insider trading regulations and its whistleblower programme. BinckBank strives to comply with all existing, changing and new legislation and regulations in a commercially responsible manner.

41.13 FAIR VALUE FAIR VALUE OF FINANCIAL INSTRUMENTS BinckBank has classified its financial instruments measured at fair value in the statement of financial position in a hierarchy of three levels based on the priority of the input to the measurement. The fair value hierarchy assigns the highest priority to quoted prices in an active market for similar assets and liabilities and the lowest priority to measurement techniques not based on observable market data. An active market for assets and liabilities is a market in which transactions for assets and liabilities occur with sufficient frequency and volume to provide reliable price information on an ongoing basis.

The fair value hierarchy consists of three levels:

• Level 1: fair value is determined on the basis of quotations in an active market; • Level 2: measurement methods with observable market parameters; • Level 3: measurement methods that draw on non-observable input (input that is not observable in the market) that has a more than insignificant impact on the fair value of the instrument.

Observable input relates to market data obtained from independent sources. Non-observable input is input that is based on subjective assumptions made by BinckBank about factors that market players could use to determine the price of an asset or liability and which are developed on the basis of the best information available in the circumstances. Non- observable input may can consist of volatility, correlation, spreads of discount rates, default rates, recovery rates, prepayment rates, and certain credit spreads. Measurement techniques that are dependent on a proportion of non- observable inputs require a higher level of the contribution from management for the determination of the fair value.

Measurement techniques or models used to determine fair value are regularly assessed and validated by qualified staff independent of the staff who developed the techniques or models. Models are calibrated to ensure that the results reflect actual data and comparable market prices. Models use available observable data to minimise the use of non-observable inputs. BinckBank makes exclusive use of third-party valuation models and does not make any in-house estimates relating to the input. All measurements methods employed are internally assessed and approved. Most of the data used in these measurement methods is validated at periodic intervals. Measurement methods are inherently subjective. For this reason, measuring the fair value of certain financial assets and liabilities is largely dependent on estimates. The use of other measurement methods and assumptions could yield materially different estimates of fair values.

188 FINANCIAL STATEMENTS

The fair value hierarchy of financial instruments measured at fair value is determined as follows:

(amounts in € 000’s) Level 1 Level 2 Level 3 Total

31 December 2018

Derivatives 24,229 48 - 24,277

Financial assets at fair value through profit and loss 13,721 - - 13,721

Total 37,950 48 - 37,998

Derivatives 24,266 2,493 - 26,759

Financial liabilities at fair value through profit and loss 161 - - 161

Total liabilities 24,427 2,493 - 26,920

31 December 2017

Derivatives 36,912 399 - 37,311

Financial asets at fair value through profit and loss 16,613 - - 16,613

Available-for-sale financial assets - 797,294 - 797,294

Total assets 53,525 797,693 - 851,218

Derivatives 36,928 127 - 37,055

Financial liabilities at fair value through profit and loss 231 - - 231

Total liabilities 37,159 127 - 37,286

Available-for-sale financial assets consist of an investment portfolio of readily marketable bonds that are primarily traded by professional market parties without the intermediation of a regulated market. Price quotes are available from brokers on request. Transactions in these bonds are not centrally registered or published by a stock exchange and for this reason BinckBank is of the opinion that there is no demonstrably active market and has classified these instruments as level 2.

Following the transition to IFRS 9, the entire investment portfolio has been classified as ‘Financial assets at amortised cost’ and no assets are now measured at fair value. For this reason, the ‘Available-for-sale financial assets’ portfolio is no longer included in the fair value hierarchy.

No financial assets were reclassified to another level in 2018 and 2017.

189 FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS WITH A FAIR VALUE THAT DIFFERS FROM THE CARRYING VALUE The fair value of balance sheet items that are not recognised at fair value in the balance sheet after initial recognition are as follows:

FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE The fair value of balance sheet items that are not recognised at fair value in the statement of financial position after initial recognition are as follows:

(amounts in € 000’s) Carrying value Fair value

31 December 2018

Investments at amortised cost 1,033,590 1,032,298

Loans and receivables 1,409,649 1,418,646

31 December 2017

Held-to-maturity financial assets 342,190 341,330

Loans and receivables 1,303,297 1,309,618

The fair value of Cash and balances with central banks and Due from banks is equal to the carrying value. Investments at amortised cost consist of an investment portfolio of readily marketable bonds that are primarily traded by professional market parties without the intermediation of a regulated market. Price quotes are available from brokers on request. The fair value of loans and receivables is based on measurement models such as discounted cash flow models. The significant variables in the measurement model are interest, expected early redemption rates and expected credit loss.

190 FINANCIAL STATEMENTS

COMPANY FINANCIAL STATEMENTS

191 FINANCIAL STATEMENTS

Company balance sheet (before profit appropriation) (amounts in € 000’s) Note 31 December 2018 31 December 2017

ASSETS

Cash and balances with central banks* c 1,096,838 1,003,537

Due from banks* d 134,675 131,610

Loans and receivables* e 1,409,649 1,303,297

Bonds and other fixed income securities* f 1,033,590 1,139,484

Equities and other non-fixed-income securities g 13,721 16,613

Investment in associates and group companies h 125 1,721

Intangible assets i 157,214 157,950

Property, plant and equipment j 32,006 33,969

Current tax assets k 16,622 16,725

Deferred tax assets l 468 6,279

Other assets* m 162,802 95,704

Prepayments and accrued income* n 13,407 15,422

Total assets 4,071,117 3,922,311

LIABILITIES

Due to banks d 5,274 2,538

Funds entrusted* o 3,562,200 3,383,507

Current tax liabilities k 12 10

Deferred tax liabilities l 29,996 36,443

Other liabilities* p 55,084 89,060

Accruals and deferred income* q 11,773 8,663

Provisions r 3,394 8,134

Total liabilities 3,667,733 3,528,355

Issued share capital 6,750 6,750

Share premium reserve 343,565 343,565

Treasury shares (4,081) (4,282)

Revaluation reserve - 492

Other reserves 30,650 40,462

Unappropriated profit 26,500 6,969

Equity s 403,384 393,956

Total equity and liabilities 4,071,117 3,922,311

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

192 FINANCIAL STATEMENTS

Company income statement (amounts in € 000’s) Note 2018 2017

INCOME

Interest income 41,241 36,447

Interest expense (9,171) (6,401)

Net interest income t 32,070 30,046

Fee and commission income 117,770 121,622

Fee and commission expense (16,470) (18,591)

Net fee and commission income u 101,300 103,031

Results from financial instruments v 7,013 6,150

Credit losses from financial instruments w (207) (92)

Other operating income x 943 1,092

Total income from operating activities 141,119 140,227

EXPENSES

Employee expenses y 48,383 47,893

Depreciation and amortisation z 5,118 26,506

Other operating expenses aa 61,880 59,672

Total operating expenses 115,381 134,071

Result from continuing operations 25,738 6,156

Results of associates and group companies 9,842 1,378

Result before tax 35,580 7,534

Income tax expence ab (400) 1,437

Net result 35,180 8,971

193 FINANCIAL STATEMENTS

NOTES TO THE COMPANY FINANCIAL STATEMENTS

a. GENERAL

COMPANY INFORMATION BinckBank N.V., established and registered in the Netherlands, is a public limited liability company incorporated under Dutch law, whose shares are publicly traded. BinckBank N.V. is officially domiciled at Barbara Strozzilaan 310, 1083 HN Amsterdam. BinckBank N.V. provides online brokerage services in financial instruments for private and professional investors. In addition to its brokerage services, BinckBank N.V. offers asset management and savings services. Hereafter ‘BinckBank’ refers to BinckBank N.V. and to its various subsidiaries.

The company financial statements for BinckBank for the period ending on 31 December 2018 have been prepared by the Executive Board and approved for publication pursuant to the resolution of the Executive Board and the Supervisory Board dated 11 March 2019.

Amsterdam,

Executive Board: Supervisory Board: V.J.J. Germyns (chairman) J.W.T. van der Steen (chairman) E.J.M. Kooistra (CFRO) Ms C.J. van der Weerdt-Norder (vice-chairman) S.J. Clausing (COO) Ms J.M.A. Kemna Ms M. Pijnenborg J.G. Princen A. Soederhuizen

b. GENERAL ACCOUNTING PRINCIPLES

The company financial statements of BinckBank N.V. have been prepared in accordance with the provisions of Part 9 of Book 2 of the Dutch Civil Code. The option described in Section 362 Book 2 of the Dutch Civil Code of applying the same principles in the company financial statements as in the consolidated financial statements has been used. The principles in the company financial statements are therefore the same as those stated for the consolidated financial statements, with the exception of the accounting policy relating to associates.

The investments in associates are recognised and measured using the equity method. The reporting dates of these companies are the same and the accounting principles applied to their financial reporting are in accordance with those applied by BinckBank for similar transactions and events in similar circumstances.

194 FINANCIAL STATEMENTS

NOTES TO THE COMPANY BALANCE SHEET

(amounts in € 000’s) 31 December 2018 31 December 2017

c. CASH AND BALANCES AT CENTRAL BANKS 1,096,838 1,003,537

This item comprises:

Cash and balances at central banks 1,097,168 1,003,673

Accrued interest on cash and balances at central banks* (160) (136)

Provision for expected credit loss (170) -

1,096,838 1,003,537

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

This item includes all cash in ledger tender, including bank notes and coins in foreign currency, and any credit balances available on demand from the central banks in countries where Binckbank has offices and the European Central Bank. For the disclosure of the provision for expected credit loss, we refer to the notes to the consolidated financial statements.

d. BANKS

Due from banks 134,675 131,610

This item includes all cash and cash equivalents relating to the business activities held in accounts with credit institutions supervised by bank regulators.

This item comprises:

Balances available on demand 99,891 99,051

Mandatory reserve deposits 34,898 32,559

134,789 131,610

Provision for expected credit loss (114) -

134,675 131,610

The balances on demand all have original maturities of less than three months. The interest received on the bank balances available on demand are based on floating rates, derived from market rates. Included in the balance available on demand as at 31 December 2018 no amount is recognised as collateral received related tot securities lending (2017: € 1.0 million). For the disclosure of the provision for expected credit loss, we refer to the notes to the consolidated financial statements.

Due to banks 5,274 2,538

The liabilities all have a maturity of less than 3 months.

195 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

e. LOANS AND RECEIVABLES 1,409,649 1,303,297

This item comprises receivables from clients, including overnight loans and overdrafts that are collateralised by securities, bank guarantees, and receivables secured by mortgages on immovable property. The analysis is as follows:

Receivables collateralised by securities 592,531 558,796

Receivables collateralised by bank guarantees 5,292 2,739

Receivables collateralised by residential property 804,621 736,738

Accrued interest on loans and receivables 6,441 5,467

Other loans and receivables* 724 508

1,409,609 1,304,248

Less: provision for expected credit loss (2,215) (671)

1,407,394 1,303,577

Fair value adjustment hedge accounting 2,255 (280)

1,409,649 1,303,297

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

The receivables covered by securities and bank guarantees contain collateralised loans. The interest rate on these loans is based on EURIBOR or EONIA, with a floor. The interest rates for the mortgage portfolio range from 1.2% to 6.2%. For the disclosure of the provision for expected credit loss, we refer to the notes to the consolidated financial statements.

f. BONDS AND OTHER FIXED-INCOME SECURITIES 1,033,590 1,139,484

This item comprises:

Government bonds/government-guaranteed bonds* 260,636 291,709

Other bonds 773,181 847,775

1,033,817 1,139,484

Provision for expected credit loss (227) -

1,033,590 1,139,484

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

BinckBank holds a portfolio of financial assets valued at amortised cost. This is a portfolio of interest bearing securities with remaining terms until maturity of less than 3.5 years. This balance sheet item is a result of the implementation of IFRS 9. In 2017 part of these financial assets were measured at fair value whilst now these instruments are measured at amortised costs. At year end 2018 the effective yield on the portfolio was 0.52% (2017: 0.56%). For the explanation of the provision for expected credit loss, we refer to the notes to the consolidated financial statements.

196 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

g. EQUITIES AND OTHER NON-FIXED INCOME SECURITIES 13,721 16,613

h. INVESTMENT IN ASSOCIATES AND GROUP COMPANIES 125 1,721

This item comprises:

Group companies 125 1,236

Associates - 485

125 1,721

Movements during the year were as follows:

Balance as at 1 January 1,721 6,463

Capital increases and acquisitions - 1,504

Divestments (1,727) (2,617)

Dividends received - (4,400)

Reclassification due to intragroup transactions - 1,276

Impairment - 227

Share of results in associates and group companies 131 (732)

Balance as at 31 December 125 1,721

The divestments relate to the sale of the interests in Think ETF Asset Management B.V in April 2018 and Able Holding B.V. in October 2017.

The reclassification due to intragroup transactions relates to group transactions in 2013 which were reclassified to other liabilities due to the sale of Able Holding B.V. in 2017.

OVERVIEW OF GROUP COMPANIES The group companies are listed in the folowing table. Interest Interest Place Country year-end 2018 year-end 2017

Bewaarbedrijf BinckBank B.V. Amsterdam Netherlands 100% 100%

Think ETF Asset Management B.V. Amsterdam Netherlands 0% 60%

Information about the aforementioned capital interests is disclosed in note 13 to the consolidated statement of financial position.

197 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

i. INTANGIBLE ASSETS 157,214 157,950

The movements in 2018 were as follows:

Brand Customer Customer name deposits base Software Goodwill Total

Balance as at 1 January 2018 105 - 195 3,785 153,865 157,950

Investments - - - 581 - 581

Disposals – cost - - - (6,291) - (6,291)

Disposals – cumulative amortisation - - - 6,291 - 6,291

Amortisation (70) - (130) (1,117) - (1,317)

Balance as at 31 December 2018 35 - 65 3,249 153,865 157,214

Cumulative cost 350 - 650 4,986 153,865 159,851

Cumulative amortisation and impairment (315) - (585) (1,737) - (2,637)

Balance as at 31 December 2018 35 - 65 3,249 153,865 157,214

Amortisation period (years) 5 10 5 -10 5

The movements in 2017 were as follows:

Brand Customer Customer name deposits base Software Goodwill Total

Balance as at 1 January 2017 175 8,409 13,431 1,189 144,882 168,086

Investments - - - 3,720 8,983 12,703

Disposals – cost (31,405) (84,095) (131,058) (3,318) - (249,876)

Disposals – cumulative amortisation 31,405 84,095 131,058 3,318 - 249,876

Amortisation (70) (8,409) (13,236) (1,124) - (22,839)

Balance as at 31 December 2017 105 - 195 3,785 153,865 157,950

Cumulative cost 350 - 650 10,696 153,865 165,561

Cumulative amortisation and impairment (245) - (455) (6,911) - (7,611)

Balance as at 31 December 2017 105 - 195 3,785 153,865 157,950

Amortisation period (years) 5 10 5-10 5

198 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

j. PROPERTY, PLANT AND EQUIPMENT 32,006 33,969

The movements in 2018 were as follows:

Fixtures, fittings and Computer Real estate equipment hardware Other Total

Balance as at 1 January 2018 25,202 2,855 5,877 35 33,969

Investments - 138 1,653 47 1,838

Disposals – cost - (12) (2,376) (48) (2,436)

Disposals – cumulative depreciation - 12 2,376 48 2,436

Depreciation (618) (1,032) (2,112) (39) (3,801)

Balance as at 31 December 2018 24,584 1,961 5,418 43 32,006

Cumulative cost 29,827 10,440 11,797 59 52,123

Cumulative depreciation and impairment (5,243) (8,479) (6,379) (16) (20,117)

Balance as at 31 December 2018 24,584 1,961 5,418 43 32,006

Amortisation period (years) 50 5 -10 5 5

The movements in 2017 were as follows:

Fixtures, fittings and Computer Real estate equipment hardware Other Total

Balance as at 1 January 2017 25,821 3,390 5,553 41 34,805

Investments - 475 2,356 - 2,831

Disposals – cost - (103) (6,995) - (7,098)

Disposals – cumulative depreciation - 103 6,995 - 7,098

Depreciation (619) (1,010) (2,032) (6) (3,667)

Balance as at 31 December 2017 25,202 2,855 5,877 35 33,969

Cumulative cost 29,827 10,314 12,520 60 52,721

Cumulative depreciation and impairment (4,625) (7,459) (6,643) (25) (18,752)

Balance as at 31 December 2017 25,202 2,855 5,877 35 33,969

Amortisation period (years) 50 5-10 5 5

The investment in real estate includes prepayments in relation to a leasehold (operating lease) that expires on 15 april 2056. In 2018, an amount of € 256 thousand in relation to amortisation of the leasehold is recognised under depreciation and amortisation (2017 € 256 thousand).

199 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

k. CURRENT TAX

Current tax assets 16,622 16,725

Current tax liabilities (12) (10)

Total assets/(liabilities) 16,610 16,715

The balance as per year end relates to the last three financial years.

l. DEFERRED TAX

This item comprises:

Deferred tax assets 468 6,279

Deferred tax liabilities (29,996) (36,443)

Total assets/(liabilities) (29,528) (30,164)

Origin of deferred tax liabilities:

Compensating losses 468 2,948

Liquidation-loss associates - 3,288

Available-for-sale financial assets - (164)

Goodwill and intangible assets (29,705) (35,976)

Depreciation term differences for fixed assets (291) (489)

Temporary differences as a result of intercompany transactions - 232

Other - (3)

Total deferred tax (29,528) (30,164)

m. OTHER ASSETS 162,802 95,704

This item comprises:

Trade receivables 1,013 167

Receivables relating to securities sold, but not yet delivered 121,817 47,362

Derivative financial interests* 24,277 37,311

Cash flows to be settled – mortgage receivables 6,997 5,926

Other receivables 8,698 4,938

162,802 95,704

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

The trade receivables, receivables relating to securities sold , but not yet delivered and the other receivables have a remaining maturity of less than one year. The item receivables arising from securities sold but not yet delivered can fluctuate on a daily basis in line with movements in the market and the total size of the number of transactions. The derivative financial instruments contain the fair value of the turbos purchased by BinckBank as hedge of the market risk on the issued turbos. The fair value of these derivative financial instruments contains a haircut for the counterparty credit risk exposure.

200 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

n. PREPAYMENTS AND ACCRUED INCOME 13,407 15,422

This item comprises:

Commission receivable 6,181 7,484

Other prepayments and accrued income 7,226 7,938

13,407 15,422

o. FUNDS ENTRUSTED 3,562,200 3,383,507

This item comprises:

Demand deposits in savings accounts 191,058 219,707

Demand deposits in current accounts 3,370,756 3,163,676

Accrued interest on funds entrusted* 386 124

3,562,200 3,383,507

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

p. OTHER LIABILITIES 55,084 89,060

This item comprises:

Derivative financial interests* 26,759 37,055

Equity positions 161 231

Liabilities in respect of securities transactions not yet settled 16,683 39,369

Tax and social security contributions 5,012 3,631

Amounts owed to group companies 124 124

Trade payables 4,216 3,643

Other liabilities 2,129 5,007

55,084 89,060

* Includes change in presentation (see note 2.5 of the consolidated financial statements)

The derivative financial instruments contain the fair value of the turbos issued by BinckBank, interst rate swaps and other derivatives. The item liabilities in respect of securities transactions not yet settled can fluctuate on a daily basis in line with movements in the market and the total number of transactions.

201 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

q. ACCRUALS AND DEFERRED INCOME 11,773 8,663

This item comprises:

Employee expenses 6,052 5,473

Other accruals and deferred income 5,721 3,190

11,773 8,663

The employee expenses item includes accruals for holiday allowance, unused holiday leave and performance-related remuneration.

r. PROVISIONS 3,394 8,134

The movement in the legal provisions was as follows:

Balance as at 1 January 8,134 8,891

Additions through profit and loss 3,836 2,329

Utilised (7,419) (2,994)

Unused amounts reversed through profit and loss (1,157) (92)

Balance as at 31 December 3,394 8,134

s. EQUITY 403,384 393,956

Issued share capital 6,750 6,750

Number Amount Number Amount

Balance as at 1 January 67,500,000 6,750 71,000,000 7,100

Cancelled treasury shares - - (3,500,000) (350)

Balance as at 31 December 67,500,000 6,750 67,500,000 6,750

The number of shares in issue is 67,500,000, each with a nominal value of € 0.10. The share capital is fully paid up. Stichting Prioriteit Binck holds 50 priority shares, each with a nominal value of € 0.10.

Share premium reserve 343,565 343,565

Balance as at 1 January 343,565 361,379

Cancelled treasury shares - (17,814)

Balance as at 31 December 343,565 343,565

The share premium is exempt from tax and freely distributable.

202 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

Treasury shares (4,081) (4,282)

Number Amount Number Amount

Balance as at 1 January 767,419 (4,282) 5,281,525 (29,468)

Issued to Executive Board and employees (35,935) 201 (56,985) 318

Issued to third parties - - (957,121) 5,340

Cancelled treasury shares - - (3,500,000) 19,528

Balance as at 31 December 731,484 (4,081) 767,419 (4,282)

At the end of 2018, the carrying amounts of the treasury shares was measured at an average purchase price of € 5.58. The movements in the amounts of treasury shares purchased and sold are recognised under equity. At the end of 2018 the quoted share price was € 6.09 (2017: € 4.43).

Revaluation reserve - 492

Balance as at 31 December prior year 492

IFRS 9 transition adjustment (492)

Balance as at 1 January - 1,021

Movement in fair values - (645)

Taxation on the movements - 116

Balance as at 31 December - 492

This reserve comprises the movement in fair value of the available-for-sale financial assets, net of taxes. This item has been reclassified as a result of the implementation of IFRS 9.

Other reserves 30,650 40,462

Balance as at 31 December prior year 40,462

IFRS 9 transition adjustment (1,440)

Balance as at 1 January 39,022 53,660

Grant of rights to shares 216 92

Shares granted to Executive Board and employees (201) (318)

Shares issued to third parties - (806)

Cancelled treasury shares - (1,364)

Result for the year (8,387) (10,802)

Balance as at 31 December 30,650 40,462

203 FINANCIAL STATEMENTS

(amounts in € 000’s) 31 December 2018 31 December 2017

Unappropriated result 26,500 6,969

Balance as at 1 January 6,969 1,877

Addition to/(reduction from) other reserves 8,387 10,802

Payment of final dividend (15,356) (12,679)

Result for the year 35,180 8,971

Payment of interim dividend current year (8,680) (2,002)

Balance as at 31 December 26,500 6,969

204 FINANCIAL STATEMENTS

NOTES TO THE COMPANY INCOME STATEMENT

(amounts in € 000’s) 2018 2017

t. NET INTEREST INCOME 32,070 30,046

This includes all income and expense items relating to the lending and borrowing of money, providing that they are of a similar nature to interest, as well as interest income on credit balances or interest expense on overdrafts.

This item comprises:

Interest income

Bonds and other fixed income securities 4,370 4,783

Loans and receivables 36,751 31,543

Other interest income 120 121

41,241 36,447

The recognised interest income on loans and receivables in stage 3 of credit risk amounts to € 32 thousand (2017: € 19 thousand).

Interest expense

Interest paid to central banks 4,922 4,022

Interest paid to financial institutions 2,137 1,674

Interest paid on funds entrusted 1,037 503

Interest rate swaps 1,073 155

Other interest expense 2 47

9,171 6,401

205 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

u. NET FEE AND COMMISSION INCOME 101,300 103,031

Net fee and commission income comprises fees for services as performed for and by third parties in respect of securities transactions and related services.

This item comprises:

Fee and commission income

Commission income 89,984 94,691

Asset management fees 7,809 10,920

Other fee and commssion income 19,977 16,011

117,770 121,622

The item asset management fees includes a performance fee of € 0.1 million over 2018 (2017: € 1.9 million). Other fee and commission income includes all-in fees and other securities services.

Fee and commission expense

Costs of securities transactions 13,721 16,056

Asset management fees 829 849

Other fee and commission expenses 1,920 1,686

16,470 18,591

Other commission expense includes fees for the deposit and withdrawal of securities, transfer fees, other management activities, and custody fees.

v. RESULT FROM FINANCIAL INSTRUMENTS 7,013 6,150

This item comprises:

Result from hedge accounting 470 73

Result from turbo's 6,543 5,729

Result from other financial instruments - 348

7,013 6,150 The result from financial instruments arises from the valuation of the derivatives, hedge accounting and financial instruments at fair value through the income statement. Derivatives are used to hedge market risks on products offered to customers. BinckBank does not have a trading portfolio in which there is active trading in order to achieve results from value movements.

206 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

Result from fair value hedge accounting

Interest rate swaps (2,065) 353

Fair value adjustment hedged item 2,535 (280)

470 73

The result from fair value hedge accounting is a result of the ineffective portion of the hedge accounting relationship.

BinckBank has entered into a cooperation agreement with UBS for the turbos it has issued, whereby the latter bears the market risk. The revenues depend on the financing level of the turbos issued. In the fair value of the turbos a haircut has been applied to the valuation of the turbo products relating to credit risk.

The other results from financial instruments contains the movement in the revaluation of the receivable on DNB in respect of the Deposit Guarantee Scheme – DSB Bank which was settled in 2017.

w. IMPAIRMENT LOSSES FINANCIAL INSTRUMENTS (207) (92)

This item comprises the following:

Change in expected credit loss on:

Cash and balances at central banks 30 -

Due from Banks (14) -

Investments at amortised cost 5 0 -

Loans and receivables (201) (96)

Write-offs/recoveries (72) 4

(207) (92)

x. OTHER OPERATING INCOME 943 1,092

This item comprises:

IT services 368 1,326

Other revenues 575 (234)

943 1,092

This includes fees for subscriptions, courses, currency results, and other income and expense items that cannot be accounted for under other items.

207 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

y. EMPLOYEE EXPENSES 48,383 47,893

This item comprises:

Salaries 33,891 33,967

Social security contributions 5,870 5,592

Pension contributions 2,357 2,323

Profit sharing and other performance related pay 2,004 1,488

Other employee expenses 4,261 4,523

48,383 47,893

Details of the remuneration paid to the individual members of the Executive Board and Supervisory Board of BinckBank N.V. is disclosed in the consolidated financial statements.

Number of employees (including members of the board) 2018 2017

Average during the financial year 604 621

of which employed in The Netherlands 497 510

End of the financial year (headcount) 597 623

of which employed in The Netherlands 486 510

(amounts in € 000’s) 2018 2017

z. DEPRECIATION AND AMORTISATION 5,118 26,506

This item comprises amortisation and depreciation on:

Intangible assets 1,317 22,839

Property, plant and equipment 3,801 3,667

5,118 26,506

The decrease in amortisation of intangible assets is mainly due to the intangible assets related to the acquisition of Alex Beleggersbank. These assets have been fully amortised at the end of 2017. As a result, no amortisation charges for these assets are recognised in 2018.

208 FINANCIAL STATEMENTS

(amounts in € 000’s) 2018 2017

aa. OTHER OPERATING EXPENSES 61,880 59,672

This item comprises the following:

Marketing 14,467 13,981

ICT expenses 10,453 11,047

Audit and professional services 16,780 14,442

Housing 2,034 2,029

Communication and information 7,816 9,619

Costs and contribution to banking supervision 3,606 3,193

Miscellaneous overheads 6,724 5,361

61,880 59,672

The miscellaneous overheads includes office costs, banking costs, insurance, service expenses on mortgage receivables and movements in provisions.

ab. TAX

Tax 400 (1,437)

The reconciliation of the effective tax rate with the tax rate applicable to the consolidated financial statements is as follows: 2018 2018 2017 2017 Amount Percentage Amount Percentage

Standard tax rate 8,895 24,8% 1,884 22,8%

Effect of different tax rates (in other countries) 137 0,4% 66 0,8%

Effect of substantial-holding exemptions (2,461) -6,9% (345) -4,2%

Effect of tax facilities - 0,0% (3,344) -40,5%

Other effects (6,171) -17,2% 302 3,7%

Total tax expense 400 1,1% (1,437) -17,4%

209 FINANCIAL STATEMENTS

ac. NOTES TO FEES OF GROUP AUDITOR The following fees, including VAT, were charged to the company, its subsidiaries and other consolidated entities in relation to the procedures performed by the external audit firm and its affiliates as referred to in Section 2:382a of the Dutch Civil Code: Deloitte other Deloitte network (amounts in € 000’s) Accountants B.V. organisations Total

2018

Audit of the financial statements, including the audit of the company financial statements and other statutory audits of 367 28 395 subsidiaries and consolidated companies

Other audit services 46 18 64

Fiscal advisory services - - -

Non-audit services - - -

413 46 459

2017

Audit of the financial statements, including the audit of the company financial statements and other statutory audits of 394 42 436 subsidiaries and consolidated companies

Other audit services 107 18 125

Fiscal advisory services - - -

Non-audit services - - -

501 60 561

ad. COMMITMENTS AND CONTINGENT LIABILITIES

(amounts in € 000’s) 31 December 2018 31 December 2017

Contingent liabilities

Liabilities in respect of contracts of suretyship and guarantees 106 774

Liabilities in respect of irrevocable facilities

Unused credit facilities 10,795 18,638

210 FINANCIAL STATEMENTS

The remaining maturity of the outstanding liabilities is as follows:

(amounts in € 000’s) 31 December 2018 31 December 2017

Within one year 3,059 4,445

One to five years 2,812 4,425

Longer than five years 946 1,351

A termination fee has been agreed in the merger protocol with Saxo Bank. If the merger protocol is terminated by Saxo Bank because the management board and/or the Supervisory Board of BinckBank have withdrawn their recommendation of Saxo Bank’s bid or have revised them negatively, or if the merger protocol is terminated by BinckBank because a superior competitive bid has been announced or issued, BinckBank will forfeit a termination fee of € 4.3 million to Saxo Bank. If the merger protocol is terminated because the regulatory clearances have not been obtained by 1 April 2020, Saxo Bank will forfeit a termination fee of € 4.3 million to BinckBank.

Contracts with external advisers can contain fees that are conditional on completion of the transaction. In that case BinckBank will have to pay these success fees to its advisers. These fees are based on the total transaction amount and will be material.

211 FINANCIAL STATEMENTS

ae. POST BALANCE SHEET EVENTS No events took place after balance sheet date that would result in material adjustments. af. PROPOSAL FOR PROFIT APPROPRIATION The offer price of the public offer of Saxo Bank has taken account of dividends (cum-dividend). For that reason, the entire 2018 result, after deduction of the distributed interim dividend, will be added to the reserves. As a result, BinckBank will not pay a final dividend for 2018.

The profit appropriation and the proposed dividend distribution will then be as follows:

(amounts in € 000’s) 2018

Profit for 2018 35,180

Less: interim dividend paid (8,680)

Available for profit allocation 26,500

Less: addition to the other reserves (26,500)

Proposed dividend -

212 FINANCIAL STATEMENTS

OTHER INFORMATION

Independent auditor’s report

To: the shareholders and Supervisory Board of BinckBank N.V.

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 2018 INCLUDED IN THE ANNUAL ACCOUNTS

OUR OPINION We have audited the accompanying financial statements 2018 of BinckBank N.V., based in Amsterdam. The financial statements include the consolidated financial statements and the company financial statements.

In our opinion:

• The accompanying consolidated financial statements give a true and fair view of the financial position of BinckBank N.V. as at 31 December 2018, and of its result and its cash flows for 2018 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. • The accompanying company financial statements give a true and fair view of the financial position of BinckBank N.V. as at 31 December 2018, and of its result for 2018 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

The consolidated financial statements comprise:

1. The consolidated statement of financial position as at 31 December 2018. 2. The following statements for 2018: the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows. 3. The notes comprising a summary of the significant accounting policies and other explanatory information.

The company financial statements comprise:

1. The company balance sheet as at 31 December 2018. 2. The company profit and loss account for 2018. 3. The notes comprising a summary of the accounting policies and other explanatory information.

BASIS FOR OUR OPINION We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.

We are independent of BinckBank N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public interest entities, the “Wet toezicht accountantsorganisaties” (Wta, Audit firms supervision act), the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA, Dutch Code of Ethics).

213 FINANCIAL STATEMENTS

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

MATERIALITY Based on our professional judgement we determined the materiality for the financial statements as a whole at € 1,400,000. The materiality is based on 5% of profit before tax, adjusted for the one-off gain from the sale of Think ETF Asset Management B.V. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements in excess of € 70,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

SCOPE OF THE GROUP AUDIT BinckBank N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of BinckBank N.V.

Our group audit focused on significant group components. We have performed audit procedures ourselves regarding the branches of the group entities. We have also made use of component auditors from the Deloitte network to perform specific audit procedures on the branches of Belgium, France and Italy. With respect to the remaining entities we have performed review or specific audit procedures ourselves.

By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.

GENERAL OBSERVATION As part of the audit of the financial statements, we have obtained an understanding the internal controls that are relevant for the financial statements 2018 in order to select the audit procedures that are appropriate in these circumstances. The governance, risk & compliance framework enables Binckbank in managing the internal control environment effectively. This framework is maintained by the departments in the first line of defense of BinckBank N.V. and periodically reviewed by the second and third line of defense. The second and third line of defense report on a frequent basis to the Executive Board and the Supervisory Board. We believe that BinckBank’s internal control framework meets the required criteria and it allows us to perform a system based audit in an effective manner.

OUR KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

• Cut-off and accuracy of interest income and fee and commission income

Key audit matter BinckBank N.V. has several income sources, as disclosed in note 25 and 26 of the financial statements, of which interest income and fee and commission income are the most significant. Given the relative size of these revenue streams we have identified cut-off and accuracy of interest income and fee and commission income as a key audit matter.

Audit procedures performed We have tested the design, implementation and operating effectiveness of the (application) controls with respect to the cut-off and accuracy of the interest income and fee and commission income. Furthermore, we have performed a substantive analytical review using data analytics techniques complemented with detailed substantive procedures to test the underlying pricing arrangements. Finally, we have evaluated the internal accounting policies for compliance with EU-IFRS.

214 FINANCIAL STATEMENTS

• Valuation of goodwill

Key audit matter Reference is made to disclosure note 14 in the financial statements 2018. BinckBank N.V. has capitalized € 154 million of goodwill. Given the relative size of this balance in combination with the estimation uncertainty we have decided to identify valuation of goodwill as a key audit matter.

Audit procedures performed We have tested the impairment assessment prepared by the external expert employed by management. As part of our evaluation of this assessment, we have evaluated the fair value and the determination of the book value on reasonableness. The fair value is derived from the intended offer by Saxo Bank on the shares of BinckBank N.V. As part of these testing procedures we have obtained information supporting the assumptions and tested this information, where possible, with the use of external sources. Furthermore, we tested the arithmetic accuracty of the impairment test.

• Reliability and continuity of the automated systems

Key audit matter Given the activities of BinckBank N.V., the continuity of the operations is highly dependent on the IT-infrastructure as also explained in the Risk management paragraph of the annual accounts. Therefore, reliability and continuity of the automated systems has been a key audit matter during our audit.

Audit procedures performed We have tested the reliability and continuity of the automated systems relevant for our audit. For this purpose we have made use of IT auditors within our audit team. Our procedures included testing the design, implementation and operating effectiveness of the relevant general IT and application controls.

• Legal disputes and compliance with law and regulation

Key audit matter Law and regulation with respect to financial institutions is extensive and subject to change. BinckBank N.V. is active in several jurisdictions which all have their specific requirements. Furthermore, BinckBank N.V. is involved in several legal disputes. We have focused on the accounting and disclosures in respect of legal disputes.

Audit procedures performed We have tested the design, implementation and operating effectiveness of the relevant processes for our audit with respect to the legal and compliance functions. Furthermore, we have performed detailed substantive procedures on the related provisions and have requested confirmations of the involved layers. During these procedures we have made use of local specialists when deemed required. We also considered whether the disclosures in note 21 of the financial statements in respect of this legal exposure is compliant with the relevant accounting requirements. We focused on the adequacy of disclosure of the related risks and assumptions.

REPORT ON THE OTHER INFORMATION INCLUDED IN THE ANNUAL ACCOUNTS In addition to the financial statements and our auditor’s report thereon, the annual accounts contain other information that consists of:

• BinckBank at a glance • Key figures • About BinckBank • Report of the Executive Board • Corporte Governance • Risk Management • Management Statement • Report of the Supervisory Board • Other information

215 FINANCIAL STATEMENTS

Based on the following procedures performed, we conclude that the other information:

• Is consistent with the financial statements and does not contain material misstatements. • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.

Management is responsible for the preparation of the other information, including the Management Board’s Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

ENGAGEMENT We were engaged by the Supervisory Board as auditor of BinckBank N.V. on April 22, 2014, as of the audit for the year 2014 and have operated as statutory auditor ever since that financial year.

NO PROHIBITED NON-AUDIT SERVICES We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public interest entities.

DESCRIPTION OF RESPONSIBILITIES REGARDING THE FINANCIAL STATEMENTS

RESPONSIBILITIES OF MANAGEMENT AND THE SUPERVISORY BOARD FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

OUR RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

216 FINANCIAL STATEMENTS

We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.:

• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures. • Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identified during our audit. In this respect we also submit an additional report to the Audit Committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Amsterdam, 11 March 2019

Deloitte Accountants B.V.

Signed on the original: R.J.M. Maarschalk

217 FINANCIAL STATEMENTS

PROVISIONS OF THE ARTICLES OF ASSOCIATION REGARDING PRIORITY SHARES (ARTICLES 15 AND 21)

The rights attached to the priority shares include the right to make non-binding nominations for appointment to the company’s Supervisory Board and Executive Board and to take various other actions.

The priority shares are held by Stichting Prioriteit Binck, Amsterdam.

This foundation’s board, which consists of three members, is appointed by the Supervisory Board and Executive Board of the company.

The board members of Stichting Prioriteit Binck are: J.W.T. van der Steen Ms C.J. van der Weerdt-Norder V.J.J. Germyns

218 FINANCIAL STATEMENTS

PROVISIONS OF THE ARTICLES OF ASSOCIATION REGARDING PROFIT APPROPRIATION (ARTICLE 32)

1. The company may only make distributions to the shareholders if the company’s equity exceeds its issued and paid-up share capital plus the reserves required to be held by law or by the articles of association. 2. Firstly – when and insofar as profits allow – an amount equal to six per cent (6%) of the nominal value of the priority shares will be distributed on these shares. 3. The foundation will determine the extent to which the remaining profits will be transferred to reserves. Profits remaining after application of the provisions of previous paragraph and the previous sentence are at the disposal of the general meeting of shareholders. Any amounts not distributed will be transferred to the company’s reserves. 4. Withdrawals from distributable reserves may be made pursuant to a resolution by the general meeting of shareholders, subject to the prior consent of the foundation. 5. The Executive Board may resolve to allow the company to make interim distributions, providing it demonstrates in the form of an interim statement of assets and liabilities as referred to Section 105(4) Book 2 of the Dutch Civil Code that it complies with item 1 above and subject to the prior consent of the foundation. The distributions referred to in this subsection may be made in cash, in shares in the company’s equity or in marketable rights thereto. 6. The general meeting of shareholders may resolve to declare that distributions on shares other than interim distributions as referred in subsection 5 of this article (whether at the shareholders’ discretion or otherwise) may, instead of being made in cash, be made fully or partly (whether at the shareholders’ discretion or otherwise) in: a. ordinary shares (which will, if desired and possible, be charged to the share premium reserve) or marketable rights to ordinary shares, or b. equity instruments of the company or marketable rights thereto. A resolution as referred to in the previous sentence may only be passed after being proposed by the Executive Board and approved by the Supervisory Board. A proposal to pass a resolution as referred to in b will be submitted only after consultation with Euronext Amsterdam N.V. 7. No distribution will be made to the company in respect of shares it holds in its own capital or on shares for which the company holds depositary receipts. 8. The calculation of the profit distributable on shares will disregard shares that are not eligible, pursuant to subsection 7, for such distribution. 9. Once a resolution to make a distribution has been passed, the amount will be declared payable within fourteen days. An entitlement to receive a distribution will lapse five years after the date on which the amount is declared payable, and the said amount will then revert to the company.

219 FINANCIAL STATEMENTS

FOREIGN OFFICES

BinckBank Belgium Italiëlei 124 2000 Antwerp Belgium Telephone +32 3 303 3133 www.binck.be

BinckBank France 1 Rue Collange 92300-Levallois-Perret France Telephone +33 170 36 70 62 www.binck.fr

BinckBank Italy Via Ventura 5 20134 Milano Italy Telephone +39 02 360 16 161 www.binck.it

BinckBank Spain (Alex Spanje) Urbanización La Carolina Edificio Aries, Local N 29602 Marbella Spain Telephone +34 952 92 4011 www.binckspanje.com

220 FINANCIAL STATEMENTS

COLOPHON

Photography: Lex van Lieshout Fotografie, Zoetermeer, The Netherlands

Design: Mug in Vorm – Grafische Ontwerpen, Amsterdam, The Netherlands

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BinckBank N.V. Barbara Strozzilaan 310, 1083 HN Amsterdam, The Netherlands P.O. Box 75047, 1070 AA Amsterdam, The Netherlands T +31 20 522 03 78 | [email protected] www.binck.com